The Dollar continues to gain against its counterparts. The EURUSD is nearing the May and June lows. Interestingly, the $Index traded one tick above its June high today; setting up a possible divergence with the EURUSD. This would be a short term EURUSD bullish signal.
The larger EURUSD bias is bearish against 1.5699. We are working under the interpretation that the drop from 1.6039 is wave C of an expanded flat that began at 1.6018 and will not end until below 1.5283. Very near term, price is following the path that we proposed yesterday, writing that “we expect a drop below 1.5445, which would possibly complete wave i of 3 down. A sharp rally back to 1.5515 or so would follow and present a high probability bearish opportunity.” We expect the rally underway from just below 1.54 to challenge the Fibo zone (1.5513-1.5584). Under the bullish alternate, the decline from 1.6039 is wave 2 (as a double zigzag) of an ending diagonal. This count would become preferred on a rally through 1.5699. We lean towards the bear side as the EURUSD has broken below a trendline on the daily (underside of that line is at 1.5649). Also, price is below the 21 day SMA (currently at 1.5705) and the SMA exhibits negative slope.
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BOTTOM LINE: LOOK FOR SHORT ENTRY NEAR 1.555, AGAINST 1.5699, TARGTE BELOW 1.5283
We expect strength to continue for weeks, but a countertrend drop is most likely underway right now. Former resistance just below 108.50 should serve as support now (61.8% of 107.66-109.87 is at 108.50 also). Ultiamtley, we expect strength to end in the 113.25-116.65 zone (Fibo levels from the 124.13-95.72 drop) and give way to a long term reversal. The rally from 103.76 should complete the final leg in the larger corrective advance from 95.72. The near term bias is for higher prices as long as price is above 107.29 (8/1 low).
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A triangle is most likely unfolding from the 2008 low (1.9337). We wrote yesterday that “wave d should end this week and give way to the final leg of the triangle. Potential support is at 1.9469 (6/17 low). See GBPUSD trade for more on this pattern.” Cable has worked higher (slightly) from the cited support level and expectations are for the advance to continue, possibly as high as 1.9800/50. Former support at 1.9745 could also provide resistance.
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5 waves appear to be complete from 1.0010. Expectations now are for a corrective decline to end near 1.03 (former 4th wave congestion). At that point, we would look for a resumption of the advance from 1.0010 and rally to the 1.10 area (Fibonacci extension level at 1.0986 and former 4th wave congestion is near 1.10).
The USDCAD break higher from the triangle will complete a 3 wave corrective advance from .9055. Objectives are 1.05 and 1.08. The rate of change has accelerated recently, indicating that the advance probably will extend from near current levels. Risk can be moved up from .9974 to 1.0212. If a correction unfolds, then look for support near 1.04.
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The structure of the near term decline all but confirms the call for a long term reversal and multi-year top. The drop from .9204 is most likely wave 5 in the 5 wave decline from .9849. A multi-week corrective advance should begin soon
The NZDUSD has entered a long term decline. Our longer term objective is not until below .5927. However, there will be countertrend movements along the way. With 5 waves down nearing completion from .7761 (as wave 1 of 3 of C), expectations are for a large countertrend rally to begin soon.
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