Dollar Strengthens in What May be Resumption of Bull Trend

US Dollar strength early this week may mark the resumption of the uptrend (US Dollar) that began in mid July.

EUR/USD

On Friday, I wrote that "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 EURUSD has dropped below the trendline and is nearing the 61.8% Fibonacci. The decline is probably the second leg of a 3 wave correction from 1.3877. It is possible that a top is in place at 1.4871 and that a longer term decline is underway. As such, we’ll look for clarification.

USD/JPY

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. A drop below 103.52 warrants a bearish bias.

GBP/USD

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. 1.7904 is the 61.8% of the rally from 1.7443 and may provide support that leads to a bottom in wave X.

USD/CHF

On Friday, I wrote that "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 USDCHF reached the mentioned level. We’ll have to wait for clarification going forward since the advance from 1.0686 could be either an X wave (in which case a top may be in) or the beginning of a larger advance.

USD/CAD

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.

AUD/USD

I wrote Friday that "the AUDUSD B wave is underway towards the Fibonacci zone (.8247-.8076). There is a count (not shown), that treats the top at .8524 as the end of an expanded flat. Both counts warrant positioning for a decline now, against .8524." Similar to the other pairs, it is possible that a larger term decline is underway. It is also possible that the decline from .8524 is wave B within a larger correction. We’ll look for clues that clarify the picture.

NZD/USD

To repeat from Friday…"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." Expect additional weakness in wave B, to at least the 61.8%; at .6635

DailyFX

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