USD Sideways To Down. But, Some Signs Rally

CHARTS

-price bar chart

-base currency 10 yr interest rate in green

-counter currency 10 yr interest rate in red

-interest rate differential in black

-indicator that measures change in interest rate differential and change in price over 20 days is in blue (blue bar indicates strong bull move and warns of a top when no longer blue – red bar indicates strong bear move and warns of a bottom when no longer red)-referred to as JSINT

Dollar Index Daily

The trend in the USD at this point is best described as sideways to down. Price remains below the trendline that extends off of the June 2010 and January 2011 highs, which keeps the buck under pressure but the rally from the May low is sharp and the largest since the top in December 2010 thus one must consider the possibility that a major low is forming. Near term support is 7425/50 – failure to stay above there would be worrisome but the June low at 7351 is the line in the sand for bulls.

Guest Posted by Jamie Saettele, Sr. Technical Strategist of DailyFX.

Here’re his technical analysis on major USD-crosses this week.

Euro / US Dollar Daily

It is unclear if the EURUSD has topped. Much like the USD, the EURUSD trend is best described as sideways to up. Price remains above the trendline that extends off of the January and May lows so respect potential for strength into 14400/14500 early next week. If a larger top is in place, then that level should hold. The line in the sand for bears is the June high at 14696.

British Pound / US Dollar Daily

Cable has broken below the trendline that has held price since the 2010 low. The drop warrants a ‘short on rallies’ approach. Initial resistance is former support at 16208 and every 50 pips up to 16300. Looking out a bit, a break below 16057 would shift focus to a 100% extension at 15858 but the longer term triangle count (from 2009 low) suggests an eventual drop below 15000.

Australian Dollar / US Dollar Daily

The slow grinding decline in the AUDUSD from above 11000 is viewed as wave A (leading diagonal or wedge to classical technicians). The secondary top is probably in place at 10774. Like the other USD pairs, I favor shorting (buying the USD) on rallies (resistance has now been reached). Price should remain below 10715 if the larger trend is indeed down. An objective is 10200 (100% extension), which intersects with a long term trendline at the end of the month. Trading above 10715 would suggest a move above 10800.

US Dollar / Japanese Yen Daily

The latest USDJPY attempt at turning higher appears to have failed at its 20 day average (false break above trendline). A drop below 7956 would shift focus to 7856 (61.8% extension of 8552-7956 decline) and 7833 (78.6% retracement). Trading above 8160 would strongly suggest that the larger advance is underway (to above 8223 at minimum).