The EURUSD continues to probe the downside, albeit with significant pullbacks. If a larger decline is underway, then the drop should accelerate today or Monday.
Intraday moves have been large. This action is often indicative of at least a short term change in trend. Coming under 1.46 the last 2 days is a sign of weakness and indicates to me that a larger decline is underway, perhaps as an X wave. It is possible that 1.4871 marks the top of wave B within the A-B-C decline that is underway from 1.6040. I do not view this count as probable given the structure in the other USD pairs. A deeper correction of the 1.3877-1.4871 advance is preferred although structure is not clear at the moment (it rarely is during a correction). If the decline extends, then look for support at the short term trendline and 1.4250 (the 61.8% of 1.3877-1.4871).
The USDJPY range persists. There is little confidence right now in directionality at this time. That feeling in itself warns of a breakout though. A break above the resistance line that has contained price since the end of August would warrant a bullish breakout play.
The advance from 1.7443 is in 3 waves but probably only the first leg of a larger correction. I favor this scenario because the breakdown that led to the decline to 1.7443 was from a triangle. Breaks from triangles often lead to a retracement that brings price back to the center of the triangle (at least). In this case, the center of the triangle is near the 61.8% of the entire decline from 2.1160; at 1.9658. Near term, weakness is favored in an X wave. 1.7904 is the 61.8% of the rally from 1.7443.
The USDCHF decline from 1.1422 is in 3 waves and possibly the first wave of a triangle of flat. In either case, the ensuing advance should retrace a good portion of the decline. The 61.8% of the decline is at 1.1135. This is also where the advance from 1.0799 would be equal to the 1.0686-1.0940 advance.
The USDCAD bounce from 1.03 may be a small 4th wave within the impulsive drop from 1.0827. Tracing out this 4th and then a 5th wave would confirm my longer term bearish stance. Expect resistance near 1.05 (38.2% Fibo is at 1.0493 and former 4th wave is at 1.0519) if needed. It is also possible that a 4th wave is complete at a triangle.
To repeat from yesterday…“the NZDUSD may be nearing the end of a 3 wave movement from the low. While this could be the first leg in a triangle or flat, risk is quickly shifting to the downside.” It is possible that the NZDUSD turns up from here to complete a ‘5’ (5 waves) from .6435 but the position of the AUDUSD suggests that the small B wave corrections are already underway. As such, expect additional weakness in wave B.
Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.
Contact at jsaettele@dailyfx.com
