Daily Technical Briefing: USDCAD Testing 1.0300, Should You Chase It?

>> Forex Daily Analysis | Written by DailyFX | Sep 13 07 13:19 GMT |

Daily Technical Briefing: USDCAD Testing 1.0300, Should You Chase It?

Technical Overview

  • Euro All-Time High
  • Japanese Yen Wave C Towards 118.00
  • British Pound Breaks Wedge
  • Swiss Franc Correcting to 1.1900
  • Canadian Dollar Registers New Extreme
  • Australian Dollar Reverses at Fibo
  • New Zealand Dollar Small Correction Should Unfold

EUR/USD

Commentary: We wrote yesterday that "the EURUSD continues to rally and is approaching the 1.3900 figure. Measured resistance is at 1.3910 (100% extension of 1.3360-1.3719/1.3551). There is potential for a rally to the 161.8% at 1.4132 as well, but likely next week. See our special technical report on the EURUSD from Friday at EURUSD 1.40 for more analysis." Near term, the 5 wave rally from 1.3778 may have completed wave 3 within the 5 wave bull cycle from 1.3360. If this is the case, then we expect a wave 4 correction to end near 1.3784 (38.2% of 1.3551-1.3928 and former congestion) before wave 5 presses against 1.4000. Again, there is no change to the outlook for higher prices as the trend remains up.

Strategy: Exit longs at market

USD/JPY

Commentary: The 5 wave rally from 112.59 shifts focus to the upside. The count that we are presenting today is one that we have been following for quite some time. It has a flat ended at 112.59 as wave b of 2 in an a-b-c correction from 111.59. Wave c is now underway towards the 100% extension of 111.59-117.12/112.59 at 118.12 (this is also close to the 50% of 124.13-111.59 at 117.86). A rally to 118.12 would complete larger wave 2 within the 5 wave bearish sequence from 124.13 and give way to the next leg lower.

Strategy: Flat

GBP/USD

Commentary: We presented an alternate pattern yesterday and wrote that "the wedge shape of the rally from 2.0043 could be an ending diagonal in wave C within an A-B-C from 1.9651. It is also possible that the diagonal is wave i within a 5 wave bullish cycle from 2.0043. Either way, a pullback to at least 2.0235 is expected." Cable dropped to 2.0233 this morning. The decline can be counted as a 5 wave decline so look for at least one more leg lower. Near term resistance is at 2.0294. See GBPUSD Top for additional analysis.

Strategy: Flat

USD/CHF

Commentary: The drop below 1.1815 satisfies minimum expectations for the decline from 1.1898. We wrote yesterday that "this decline from 1.1898 is wave 5 in the 5 wave decline from 1.2151 so risk of an upward correction back to 1.1900 or so increases with every tick lower." That correction appears underway now.

Strategy: Exit shorts at market

USD/CAD

Commentary: We wrote yesterday to "favor the downside for a test of 1.0340 as long as price is below 1.0591." The USDCAD registered a new low at 1.0313 this morning. A major reversal is likely to take place soon so shorts should keep risk tight. This morning's low tagged the 3 year support line and there is major bullish divergence with weekly oscillators. The wave count is not labeled on this chart but it also suggests that a multi-month (possibly multi-year low) is close. There is obviously no sign of a low yet. We will wait for a 5 wave rally on the intraday chart followed by a 3 wave setback before taking a bullish stand.

Strategy: Flat

AUD/USD

Commentary: We wrote yesterday that "the pattern since the 8/27 high at .8333 is certainly corrective but so is the rally leg from .7673 to .8333. The evidence suggests that a large complex correction is unfolding and that there will be one more rally leg (above .8333)." The Aussie has pushed through .8333 and tested the 61.8% of .8870-.7673 at .8413. Potential support is at .8324 but the stalling at the 61.8% warrants a cautious bearish stand against .8437 for a larger turn.

Strategy: Flat

NZD/USD

Commentary: The Kiwi structure is unfolding as expected. That is, the rally from .6824 is impulsive (5 waves), indicating additional upside potential. Near term, expect a drop below .7071 to complete a small correction from .7159 before the next advance. A rally through .7272 would possibly complete an a-b-c correction from .6639 (much like the AUDUSD may have already done).

Strategy: Remain bullish, against .6824, target above .7272


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