British Pound Dip to 1.84 May be Exhaustion Drop.

As we suggested in Friday's GBPUSD report, British Pound weakness to begin the week proved temporary. A larger recovery of the decline from July may be underway. 1.4672 has remained intact and the EURUSD has found demand in just the last few hours. We maintain that a large correction is underway and that at least a portion of the decline from 1.6039 will be retraced. 1.4980 is potential resistance this week but the Fibonacci zone does not begin until 1.5168. Volatility may be inspired by key events this week. The entire advance from 95.72 has now retraced 50% of the drop from 124.13. The rally from 95.72 is clearly NOT impulsive as well. Both of these points indicate the likelihood of an amazing shorting opportunity against 124.13, eventually. When will the corrective advance from 95.72 end though? The second leg of the correction would equal the first leg of the correction at 116.61, which is just below the 78.6% of 124.13-95.72 at 118.05. An area before that which could produce a top would be the 61.8% at 113.28. Shorter term, there are 5 waves up from 108.12 to 110.28. A correction of that rally should find support near 109 (61.8%). The decline since the end of July is in 5 waves and a sizeable countertrend rally (at minimum) should be underway over the next several weeks. See Friday's GBPUSD report for more about this pair. The USDCHF is testing the confluence of the 38.2% of 1.3284-.9647 / former resistance. The area should provide some opposition to additional gains. A push above 1.1040 faces resistance from the 2/13 high at 1.1105. However, the pair is vulnerable to a sharp dollar pullback. 1.09 may be short term support. We know that the advance from .9974 is most likely the 3rd wave to complete the rally from .9055. As such, the USDCAD is vulnerable to weakness from current levels. However, watch for Fibonacci support, especially from the 61.8% at 1.0261 (this is also former congestion). The AUDUSD decline from .8813 is in 5 waves but the pair did make a new low. Short term strength should give way to a drop below .8591 before a low is in place. Potential resistance is at .8737. The rally from .6824 is likely wave A of an A-B-C correction. Wave A took the form of a diagonal (leading). The next move should be lower in a B wave to at least .7038 and perhaps the 61.8% at .6973. Short term resistance is the .7125/50 zone. 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. Contact at [e-mail]

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