Dollar Still Flexing...but Key Levels Well Defined

[DailyFx]

The USD rallied overnight but we maintain a bearish bias. Levels are well defined for the EURUSD, GBPUSD, and USDCHF.






The EURUSD has broken to multi-day lows but the larger bullish bias is valid as long as price is above 1.5283. The decline from 1.5817 is labeled as a W-X-Y (complex) correction. The minimum bullish objective is one pip above 1.5817. Even if a larger more complex correction is unfolding from 1.6018 (such as a flat or a triangle), price is still expected to exceed 1.5817.

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STRATEGY: Bullish, against 1.5283, target above 1.5817


Where does the corrective USDJPY rally end? We have tried catching this turn 3 times and each time the market has told us that we are wrong. Potential resistance extends to the 2/28 high; at 106.63. This is also a major congestion area. Ideally, a top forms before 107.20 (failure to do so would require us to reassess the longer term pattern).

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Similar to the EURUSD, the GBPUSD has broken to multi-day lows but the larger bullish bias is intact as long as price is above 1.9362. Today’s low (1.9525) is at the 78.6% of 1.9362-1.9850. As long as 1.9362 is intact, the GBPUSD is expected to exceed 1.9850 and reach resistance from daily highs just shy of 2.0250.

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STRATEGY: Bullish, against 1.9362, target above 1.9850


There is little doubt that the advance from .9647 is corrective because a triangle separates the two legs. The only question is whether or not the rally from .9647 is a complete 3 wave rally or just the first wave of a larger more complex correction. Regardless, a bearish bias is warranted against 1.0527.

STRATEGY: Bearish, against 1.0527, target TBD


The USDCAD continues to work higher from the 78.6% of .9710-1.0324 at .9841. The push through .9997 is evidence that a low is in place. Risk can now be moved to .9823. Remember, the minimum objective is above 1.0324. The alternate (in red) is a triangle, so think about taking some longs off of the table near 1.02 (current price). The rally from .9818 would be wave D of the triangle (to be followed by wave E lower and then a bullish breakout).

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STRATEGY: Bullish, against .9967, target above 1.0324


The advance from .8952 is likely the final leg of a diagonal that will lead to the major top mentioned in the longer term chart. “The rally from .8952 is wave C of a large 5th wave diagonal that could extend to a measured objective just below 1.00 in coming weeks (.9936).” Support has held at the trendline near .9500 (testing it right now). A bullish bias is warranted against .9290 although price ideally remains above .9486.

STRATEGY: Bullish, against .9486, target .9936


From a price structure point of view, the decline since the March top at .8215 has been choppy and corrective. The drop counts well as a double flat (this is a complex correction). Moreover, the legs of the decline are roughly equal (a common characteristic among corrections). The leg up from .7536 is the closest thing to an impulse that the NZDUSD has shown since the March top. As such, a bullish bias is warranted against .7536 and the target is above .8215. This morning’s plummet may be wave C within the A-B-C decline from .7921.

STRATEGY: Bullish, against .7536, target above .8215

Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com