Dollar in Bear Trend but Expect a Short Term Rally

[DailyFx]

The next round of USD weakness is most likely underway but expect a short term USD decline. Look for the GBPUSD to come under 1.9583 but remain above 1.9469. The EURUSD is bullish as long as price is above 1.5303 but a drop below 1.5464 is possible.






There is very little change from yesterday. “We maintain a bullish bias against 1.5300 but at the current juncture there are many different valid counts. Given the tendency for 4th waves to unfold in a complex manner, the rally from 1.5303 could be the final leg of a large B wave. It is also possible that a B wave is complete at the June 9 high. The alternate is very bullish and treats the rally from 1.5283-1.5817 as wave i and the decline to 1.5303 as wave ii. Under this count, wave IV is complete at 1.5283. In cases such as these, simply going with the break does not give one a high probability for success. For example, a drop below 1.5283 could complete a large C wave. Similarly, a push through 1.5843 could complete a large B wave. Given recent COT readings, we’ll stay bullish against 1.5303 since 2 of our counts call for a push through 1.5843.” Very short term, a drop below 1.5464 is possible in a small c wave.

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STRATEGY: Bullish, against 1.5303, target above 1.5843 (a drop below 1.5464 is possible first though)


Longer term, The advance from 95.72 is most likely corrective, but there appears to be additional upside potential over the next month or so. The first leg of the correction (95.72-105.70) consists of overlapping waves and is the first wave of a 3 wave sequence. The advance has formed a channel and the upper end of the channel is not until the 111/112 area. Also, the wave from 102.58 would equal the 95.72-105.70 advance at 112.62.” Short term, Elliott channeling suggests that wave v of C is underway now. Look for a push through 108.57 this week or next.

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As long as advances are unfolding in 5 waves, we’ll maintain a bullish bias above 1.9469. The advance from 1.9583 counts well as a b wave correction and the preceding decline from 1.9790-1.9583 is wave a. Expect a drop below 1.9583 to complete wave c and the entire correction from 1.9790 (wave c would equal wave a at 1.9540). The larger count calls for a rally through 1.9850 and likely test of 2.00 in the coming weeks.

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STRATEGY: Bullish, against 1.9469, target above 1.9850 (expect a drop below 1.9583 first though)


The USDCHF remains stuck in a tight range, so a break in either direction is likely to be violent. The weight of evidence suggests that the break will be lower but the pattern is not especially clear. “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.” The down-up-down-up sequence since the 1.0624 top could be a series of 1st and 2nd waves. However, confidence in this count is low as the pattern since 1.0540 is not indicative of a 3rd wave decline.


A triangle is unfolding. Expect wave E of the triangle to end below 1.00. This decline will present a high reward/risk opportunity against .9818. A breakout in larger wave C towards 1.05/08 is expected to follow completion of the triangle.

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STRATEGY: Bullish, against .9818, target above 1.0324 (but a test of 1.00 is probable in wave E of the triangle)


The AUDUSD advance is tracking our preferred count, confirming that the decline from .9653 was corrective and that the pair is likely headed to a new high. We wrote yesterday to “remain bullish as long as price is above .9327 but traders may wish to lighten up on a move through .9566 (shown above). This could complete a 1st wave and give way to a correction that comes back to at least .9492.” It does look like there are 5 waves complete at .9585 and a 3 wave correction should take place and end no lower than .9487.

STRATEGY: Bullish, against .9327, target TBD (but a corrective decline should be underway towards at least .9487)


Bigger picture, the NZDUSD is expected to advance to the 50% of .7921-.7445 at .7683 and perhaps even the 61.8%-78.6% at .7740-.7920. A rally to there would fill the 6/4 gap. The up-down sequence from .7445 is probably waves A and B. Wave C is considered underway as long as price is above .7445. As such, a bullish bias is warranted against .7445 (for a push through .7646).

STRATEGY: Bullish, against .7445, target TBD


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