Prices retraced to the 78.6% level of the panic decline after the SNB peg break. What’s interesting is that’s also resistance from the wave a of (iv) and c of (iv) low. Prices immediately turned back down from there and have now broken the flattest trendline we can draw. That spells trouble for the dollar versus the franc, and we’re bearish against this week’s high. It’s tough to trust that the SNB won’t reinstate its peg at some point, but we should at least see a return to support in the .9000 range, even if the larger trend is up. If the larger trend is down, prices are about to collapse. It’s a nice asymmetric outcome (i.e. little risk, a lot of potential reward).
The descending triangle pattern we’ve drawn is not an Elliott pattern. It’s a classic technical analysis formation, though, that is indicative of distribution, since you’ve got lower highs and flat lows. We’re going to stick with our wave (3) top in place count, unless prices are able to push above the wave b/ii high. Until then, we’ll be looking for wave c/iii to the downside to correct the massive rally we’ve seen in USDCAD. Like the other dollar pairs, a correction will reset this market for another impulsive move, in USDCAD’s case, to the upside. Even a push to new highs won’t turn us into bulls; instead, we’ll be considering an expanded flat pattern for wave (4), or a significant top in wave 5 of (3).
We kept Twitter followers updated on our USDJPY thoughts this week, as this seems to be the most actionable market right now. Triangles happen to be my favorite pattern to trade because they give you so many reference points. For instance, if wave E of (4) is still underway (per the “alt” count), it should remain above 117.11, where there would be two equal waves down from the wave D high. Below 117.11, and it seems more likely that we’ve been witnessing a massive distribution pattern that is going to break substantially to the downside (an alternate not shown on the chart). Until that happens, though, our top count remains in force. We’re bullish near term against Friday’s low, targeting 122-124.00. If we see an early week pullback, below Friday’s low, then that’ll activate the alternate count where we’ll be looking for the wave E of (4) bottom above 117.11. A break of 117.11, though, would mean that there’s likely some bigger problems here, and in global markets, and that we should look for an unwind back to the previous fourth wave 105.42 at a minimum.
The Kiwi will have two equal legs up at .7587, and that’s also former support which is now resistance. So, any significant move beyond that level, would suggest that our count is correct, and that a larger rally was indeed underway. And, as long as prices are above .7450 we can leave the idea on the table that an impulsive rally is underway. So far there’s only three waves up from the low, but as long as prices remain inside, or above, the base channel, there’s potential for substantially higher prices (.7800 is the 38.2% retracement, and .8000 is the prior fourth wave extreme and 50% retracement).
Aussie had a decent week, but it’s still below trendline resistance. We’re looking higher, into .8000, at least, prior to significant resistance. It’s hard to be really excited here, but the prior decline is fully developed. Even a return to the previous fourth wave, of one lesser degree, would be a shock to most market participants. Perhaps our uncertain tone is a reflection of just how one sided this market has been for the past several months. We’re not going to fight this budding uptrend, but would suggest being nimble considering the heavy structural resistance overhead.
Prices have pushed significantly above the down trendline keeping the larger rally count alive. The action down from this week’s high appears corrective, so we’re still expecting prices to reach the head and shoulders target near 1.5500. That also coincides with former support, now resistance, so prices may have some trouble pushing through that area. But, with RSI having pushed into “sustainable bull territory,” and only having pulled back to support, we’ll say the near term trend is up, unless the 1.5200 key support is broken.
We have a clear five waves down from the wave (iv) high. So, even if our larger count is off base, we could still see an upward correction of that impulse reach 1.18 or so. We can’t rule out that the larger trend is still down per the alternate count, or even something more bearish, but the action down from the a/i high looks corrective. As long as prices are above 1.1265 we can expect prices to head higher near term. Even a break of that level might only mean a flat correction for wave 2 was underway. There’s plenty of resistance overhead, but we’re going to stick with our count, unless evidence suggests otherwise. Lastly, notice the behavior of RSI, where it pushed into the upper blue zone (sustainable bullish territory) at the wave a/i high, held above the lower grey area for the past two weeks, and has pushed back above 50 on Friday. All of that supports further upside, albeit as nimble bulls. So, both Context and Momentum are bullish – now we look for Signals.
Looks very nice, haven’t looked at that pair in a while, so thanks for that. Of course, X and W should be swapped, but just a typo. 
Thursday’s breakdown in EURUSD leaves little doubt that the action up from 1.1186 is corrective. The obvious interpretation is that a wave iv, or (iv), triangle is complete with EURUSD targeting the 1.07 equality area. That’s also what our RSI study suggests, that further weakness is ahead. In addition, notice how prices found resistance at the trendline drawn off of the wave (i) and iii lows. Market prices clearly operate within Elliott wave rules and guidelines, but they also seem to operate within a geometric realm as well. That’s why trendlines, Gann and Fibonacci measures often result in attracting or repelling prices. But, call me stubborn, I can’t seem to let go of the idea that EURUSD is going to fool the majority of market participants who are looking for further euro weakness, based on the eventual Grexit or ECB QE. Joseph Granville used to say, “What’s obvious, is obviously wrong.” I just can’t shake that idea right now, but there’s a difference between an analytic opinion, and a trader putting capital at risk for that concept. As an analyst, I can leave the top count in place, but as a trader, I won’t touch the long side of EURUSD while we’re below the (i)/iii and (iv)/iv trendlines. But, bears be warned, a push back above resistance near 1.1280 may cause a stampede of short covering.
Here too, prices have rallied in a corrective manner, and on Thursday they failed at resistance. The rally reached the head and shoulders target, although it has fallen short of prior fourth wave, and the .382 Fibo, both near 1.5800. But, from an objective point of view, both pieces of evidence are bearish, and the only question is will it be bearish from a slightly higher level. Prior to the reversal, RSI poked into “sustainable bull territory,” so this pullback could be another (x) wave. But, the larger trend is down, so we’re certainly not going to fight that trend in anything but the most nimble manner. Prices should find some support near the broken resistance area around 1.5381, and any break of that area would suggest new lows are coming directly. Again, from an analyst’s perspective, a “proper” sized rally would be preferred, but from a trader’s point of view, we’d prefer to be on the side of the one larger degree trend.
Anyone else notice a theme here? The non-dollar pairs so far have all rallied in non-impulsive fashion, and all failed at resistance. That doesn’t mean AUDUSD can’t find support near .7700, though in a (b) wave, which would allow for an impulsive © wave rally. One problem with Elliott is that we’re always looking for “proper” waves. But, markets will do, what markets will do, and despite my desire for a “proper rally” I can’t argue at all with a bearish stance against Thursday’s high. I just have a hard time thinking that it’s as high of a probability as most traders think that new lows are directly ahead. In fact, wouldn’t it be a great time for the market to trace out an expanded flat for wave (b), followed by an impulsive rip to the upside? I guess my point is that traders should be nimble here in what seems to be either a late stage breakdown, or the middle stage of a larger corrective bounce. As expected, though, Aussie does seem to be acting much weaker than its cousin down under, NZDUSD.
There’s several counts on the table with NZDUSD, but similar to the others, prices failed at resistance. There’s five waves up from the low, although it’s overlapped in two key areas, so the near term count is a bit fuzzy. It could be a leading diagonal up, which would have us looking for a deep retracement, or it could be an abc up with an ending diagonal for c (our “top” view). What’s clear is that price have rallied in two equal waves up from the low, and failed at structural resistance from former support at the wave (.b) low. Here, too, though, new lows directly aren’t guaranteed. It’ll be the nature of the early week decline (corrective or impulsive) that will tell the tale. Stay tuned to Twitter for mid-week updates. As long as prices are above last week’s low at .7421, there’s a chance for the B wave rally to develop further.
The situation in USDJPY is a bit what I’m talking about when it comes to EURUSD. After Tuesday’s reversal, it seemed almost a forgone conclusion that wave E was still underway. But, the action to end the week suggests otherwise. “What seems obvious, is obviously wrong.” While it’s still possible that we’ll get wave © down to complete E of (4), that’s not going to be our top count heading into next week. There’s still significant resistance at the top of the range around 119.80, but a push above there will eliminate any other bearish potential. A break of the up trendline drawn off of the wave C and y lows would likely mean © was underway. Until that happens, we can look for prices to push to a new high, in potentially a straight line type of a move. 122.00-124.00 seem to be likely stopping areas, although higher potential does exist.
Not much changed this week for USDCAD. The dips were bought and the rallies were not, so the triangulation continues. We’re still of the belief that the pattern will break lower, but that seems close to even odds today. We’re certainly not going to fight any weakness that nears 1.2350, since the pattern projects lower down to the 1.1900 area, while the upside rally would be of the terminal variety, in all likelihood. We have added the alternate count which suggests wave (3) is still in progress, in the event of a push beyond last week’s high.
The pattern is a bit of a mess, given the peg panic. But, RSI is telling a clear tale, in that prices pushed to a new high above last week’s, but RSI didn’t even make an attempt. This bearish divergence bodes ill for a further rally. So, we’ll be awaiting a reversal signal, especially given the abundance of overhead supply here. Given the lack of strength in other pairs versus the dollar, the franc may actually be our best bet for playing further dollar weakness, so don’t forget about this pair this week. We’ll update Twitter followers this week should we see something actionable.
I noticed that after posting but naturally W before X. 
Agree cable has pulled back and wil probably do one more up move and then head lower. Price is on the 55EMA and resisting.
Sorry to crash the Elliott party without the appropriate requisites, but I just wanted to add
that this week is loaded with event risk for both the Pound and the Dollar, although fundamentally
we have a clear picture of a hawkish-leaning Dollar ahead of the Pound in terms of rate hikes,
so the market may disregard positive Pound data and, indeed, continue to push the Cable’s price
lower, in the expectation of Yellen’s mid-2015 rate hike (0.25bps, possibly).
EUR/GBP looks even stronger to the downside, given that the fundamental disparity between extremely dovish (ECB) and hawkish (Fed) makes this pair even more clear-cut for shorting than the GBP/USD…
Hard to say whether either EUR/GBP or GBP/USD are ‘oversold’, but if I had to sell anything I would
rather sell Euros against the Pound, at the moment, than Pounds against the US Dollar.
Good luck trading out there!
I agree that “event risk” and fundamentals all play a part in market action, unlike some “purists.” Although, I do believe that they only exacerbate volatility and push prices within their existing structures. That being said, understanding a fundamental argument, or narrative can provide conviction to a wave count, or opinion.
That conviction from fundamental analysis has led to some of my best trades, like USDTRY, shorting junk bonds and financials back in '07-'08.
I’m interested in seeing and hearing more in this thread.