Dollar Rally Pushing Limits of Bearish Case

Daily Forex Technicals | Written by DailyFX | Jul 24 08 13:26 GMT |

The EURUSD decline is getting awfully deep for a correction; which has us thinking that it may not be a correction. 1.5611 still remains key for bulls. We've proposed an alternate count that has very bearish implications. EUR/USD The preferred count that we have been tracking is in black and is valid as long as price is above 1.5611 (red horizontal line). BUT, given the extended weakness from 1.5944 (well beyond where the decline would equal the 1.6039-1.5783 drop), presentation of an alternate count is warranted. While the preferred still treats wave IV as a triangle (complete at 1.5468), the alternate (in red) treats the correction from 1.6018 as a flat. Wave C of the flat would be underway now and would not end until below 1.5283. Near term resistance is 1.5700/36. STRATEGY: Bullish, against 1.5611, EXIT AT 1.57 (if given the chance) and FLIP to Bearish against 1.5797 USD/JPY We put forth a possibility yesterday for the USDJPY, mentioning that a triangle could be unfolding in the X wave position from 108.57 (this means that the rally from 95.72-108.57 is wave W). If a triangle is unfolding, then the pair should decline in wave c soon. Range trading would dominate for the next few weeks before a bullish break. GBP/USD The drop below 1.99 negates the short term bullish bias. The GBPUSD is currently testing the trendline drawn off of the 6/13, 7/7, and 7/8 lows. A clean break of this line would confirm that wave D of the larger triangle is underway towards 1.9550/1.96. Look for resistance near 1.99 (former support). USD/CHF It is looking now as though the 3 wave rally from .9647 was wave W in a complex correction. The choppy decline from above 1.06 serves as wave X and wave Y is underway now and will end above 1.0624. Near term support is at 1.0350. USD/CAD Wave E may be complete. The USDCAD has formed a base from the 7/15 low and a bullish bias is warranted against .9818. This is to prepare for the breakout above 1.0378 that is expected in the coming weeks. STRATEGY: Bullish, against .9818, target above 1.0378 AUD/USD The drop below .9677 may be a C wave of an A-B-C decline from .9849. If so, then the AUDUSD is near a low and .9849 will be exceeded. Similar to the EURUSD though, the decline is getting a bit deep for a c wave so probability is increasing that a major top is in place. We’ll look to identify safe bearish entry points going forward. NZD/USD We wrote yesterday that "the NZDUSD continues to fall and is likely in a 3rd wave down. A break of .7445 would confirm that speculation." The pair broke the level and is headed much lower in the coming weeks. Targets are at .7280 and .6990 (the long term target is not until below .5927). Resistance is in the .7450/.7500 zone. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.