The USD likely continues to fall this week. From a reward/risk standoint, the GBPUSD is probably the best opportunity over the next few months.
It remains possible that a large 4th wave (IV) is underway towards the 1.43/1.47 area but we presented an alternate last week as market psychology was indicative of a bottom. The alternate (in red) treats the recent decline as wave iv in a 5 wave advance from 1.4310. Wave v would complete wave III within the 5 wave advance from 1.2482 and give way to the larger correction back to the mid 1.40s.
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The push through 1.5570 confirms that our bullish stance is correct (and also completes an inverse head and shoulders). The rally from 1.5283 could be a series of 1st and 2nd waves or wave i of a diagonal. Either way, look higher near term. Risk can moved to 1.5396, but support should be strong in the 1.5533/55 zone.
STRATEGY: Bullish, against 1.5396, target TBD
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The USDJPY count that treats the rally from 95.72 as a 4th wave is valid as long as 107.20 remains intact. The structure of the rally from 95.72 and weakness last week support our bearish argument. The bear case is strong below 107.20 although price ideally remains below 105.70.
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We remain bearish as long as the USDJPY is below 105.70 (which has come close to being breached seemingly this entire week). The potential for a sizeable decline in a 3rd of a 3rd wave within the bear cycle from 105.70 does exist.” The count described remains favored but the alternate treats the consolidation since 105.70 as an X wave (probably will form into a triangle), which will lead to a new high in wave Z before the larger decline resumes.
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STRATEGY: Bearish, against 105.70, target TBD
Bigger picture, a 5 wave advance from 1.7047 is complete at 2.1160. Therefore, a large 3 wave correction is underway from 2.1160. The first leg of that correction (A) is complete at 1.9337. We previously favored the idea that the B wave top was in place at 2.0397 but the way in which the decline has unfolded from there gives more weight to the alternate count; that treats wave B as a complex correction that will not end until above 2.0397. The rally should be strong. Most final legs of corrections are strong moves and serve to convince the majority of market participants that the previous trend (in this case, up) is back underway.
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It is likely then that a complex correction (W-X-Y) is unfolding since the 1/22 low at 1.9337. Within wave X, the two legs of the decline would be equal at 1.9228. This does not mean that Cable will reach that level but it is an area to expect support. In summary, we expect a larger rally to begin in the next few days (there is the possibility that a low is in place at 1.9364). A bullish bias is warranted against 1.9362
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STRATEGY: Bullish, against 1.9362, target above 2.04
The drop from 1.1105 was wave 5 within a 5 wave drop from 1.3295. Under this count, a major low is in place and the USDCHF is working higher towards Fibo resistance; which does not begin until 1.0840. Former support at 1.0728 may provide resistance as well.
We view the rally from .9674 as an A-B-C advance (corrective) but this does not mean that the larger downtrend is back underway (similar to the EURUSD). The advance may well be the first leg in a larger, more complex upward correction but a sizeable decline is expected regardless (probably into parity).
STRATEGY: Bearish, against 1.0624, target below 1.0389
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The USDCAD count is tracking well. We had mentioned in recent days that “the decline is expected then to continue until measured support, which begins at .9945 and extends until .9841. The larger bullish bias is valid against .9710.” The pair is nearing support from the 61.8% of .9710-1.0324 at .9945. The next level of potential support is just below there at .9903 (100% extension of 1.0324-.9987/1.0241).
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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.
Kiwi has reversed in impressive fashion. The break through .7727 negates the near term bearish bias. The Fibo zone at .7783/.7850 is potential resistance. There are 5 waves up from .7536, indicating additional bullish potential. Look for support at .7682.
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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.
[3] 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.
