US Dollar Pullback (Decline) May Accelerate
Written by Jamie Saettele, Senior Currency Strategist
The EURUSD is holding above a short term support line. Staying above there keeps the recovery scenario firmly on track. “The decline from 1.4871 is an impulse (5 waves). Expectations were that the ensuing advance would prove corrective and it has.
The EURUSD is holding above a short term support line. Staying above there keeps the recovery scenario firmly on track. “The decline from 1.4871 is an impulse (5 waves). Expectations were that the ensuing advance would prove corrective and it has. However, the advance is extremely shallow when compared with the preceding decline, having not even reached the 38.2% (which would be near 1.39).” .
The USDJPY has reached the 38.2% of the most recent 5 wave drop. Not shown is the break above a short term trendline. This development suggests that a larger correction, perhaps to the 61.8% (103.44) is underway
A flat could be unfolding in which the B wave low is this dip below 1.73. The other possibility (shown on the chart) is that the GBPUSD is about to accelerate lower in a 3rd wave (possible as long as price is below 1.7662). Given the extent of the decline to this point, the former seems more likely.
“The USDCHF exceeded 1.1422. The advance is in 5 waves (as is the EURUSD decline from 1.4871) so a 3 wave correction is expected. Initial support is at 1.1215.” The USDCHF has declined in 3 waves and reached the former 4th wave, which is always the first potential support area. Subjectively, I favor the idea that the drop is the first leg of a larger correction.
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.