Both the EURUSD and AUDUSD declines from thie respective highs are in 5 waves, confirming that a significant top is in place. The USDCAD rally is about to accelerate in a 3rd wave.
Last week, we wrote that “the revised count is more bearish than before since expectations now are for a larger degree 4th wave correction. 4th waves usually end in the territory of the 4th wave of one less degree; which does not begin until 1.4967. Under this forecast, a multi-week (maybe multi-month) top will form soon (there is a chance that a top is in place at 1.5983).” The EURUSD did make one more high (slightly) at 1.6018 but the large 4th wave correction that we expected is underway. The Fibonacci support zone does not begin until 1.4667.
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5 waves down from 1.6018 confirms that the an important top is in place. The rally from 1.5554 is in 3 waves and is therefore corrective. 1.5694 may be the top of wave 2 (as shown above). The alternate count treats the rally from 1.5554 to 1.5694 as wave w in a larger w, x, y correction. Potential resistance on a push through 1.5694 begins at 1.5731.
STRATEGY: Bearish, against 1.5905, target below 1.5342
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Longer term, we maintain that a 12 year triangle ended at 124.13 in June 2007 and that the USDJPY is headed lower for a test of its 1995 low at 81.12. The rally from 95.72 is viewed as wave iv within the 5 wave decline from 117.93 If this count is correct, then the USDJPY must remain below 107.20 (the bottom of wave 1 of the same degree). There is potential resistance from the 1/23 low at 104.95 and the 50% of 114.65-95.72 at 105.18.
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The surge through 104.64 negates the immediate bearish bias. We still maintain that the larger trend is down but a larger corrective advance is probably unfolding. If so, then a potential reversal point is the 100% extension of 95.72-102.95/100.02 at 107.25 (as well as the mentioned 105.18 on the previous chart). The larger trend is down and we will be looking for opportunities to short.
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The GBPUSD declined in 5 waves from 2.1160, indicating that a significant top is in place. The 5 wave decline is viewed as either wave 1 in a 5 wave bear cycle or wave A in a 3 wave bear cycle. In other words, longer term bearish potential is great. The rally from 1.9337 is either wave 2 or B and is complete at 2.0396. The decline should accelerate this week or next if a 3rd wave lower is underway. The alternate is still longer term bearish but treats the decline from 2.0396 as wave X in a complex correction.
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We are treating the drop from 2.0396 as a leading diagonal (wave 1 of C within the A-B-C decline from 2.1160). Under this interpretation, the GBPUSD rally from 1.9599 is wave 2 within the 5 wave drop (wave C) from 2.0396. In order for the bearish bias to remain intact, price must remain below 1.9998.
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STRATEGY: Bearish, against 1.9998, target below 1.9337
One possible count treats the drop from 1.1105 as wave 5 within a 5 wave drop from 1.3295. Under this count, a major low is in place at .9647 and the USDCHF will work higher over the coming weeks and months towards Fibo resistance; which does not begin until 1.0840. An alternate treats the rally from .9647 as a correction, meaning that the USDCHF will register one more low before a larger bounce.
The USDCHF is nearing where the rally from .9871 would equal the .9647-1.0249 rally; at 1.0473. Look for resistance near there. Keep in mind that the longer term preferred count suggests a rally back to the 1.10/1.12 level. At this point, reward/risk on either side of the market does not warrant a position.
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We remain aggressive USDCAD bulls as advances since the .9055 low are in 5 waves and declines are in 3 waves. Near term, price should remain above .9998 and we will not even think about an objective until the pair has exceeded 1.0324. Near term, the advance from .9987 is a series of 1st and 2nd waves. As such, the rally should accelerate.
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STRATEGY: Bullish, against .9987, target above 1.0324
The break of a support line drawn off of the 8/17/07 and 1/22/08 lows strongly suggests that the wave C decline has started. The long term count calls for this C wave to eventually end below .5927.
The intraday pattern is not too clear. However, one possible near term count that fits with the longer term bearish Kiwi and bullish dollar scenario is a 1st wave down from .8215 as a leading diagonal and a wave 2 bounce that has ended at .8033. As long as price is below .8033, we are bears.
STRATEGY: Bearish, against .8033, target TBD
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[1] STRATEGY is a quick summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughtout the week; these are published at separate articles at DailyFX.
[2] TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.
[1] ELLIOTT WAVE VIEW is our assessment of both the longer term (DAILY BARS) and shorter term (60 MINUTE BARS) EW structure. This is the basis for our STRATEGY.
