The caption of the daily chart says about all we need to say - the evidence remains in favor of the top count. Until the longer term up trendline or the 61.8% retracement level of wave 3 is broken, we’ll continue to favor the upside given the Sustainable Bull reading into the high on RSI, and the bullish behavior of RSI into the wave 4 low.
The closer look shows not only the support from the 50% retracement of the wave 3 rally, but also the broken trendline off the high. The decline from the wave 3 top is corrective looking, and the action up from the wave 4 low looks impulsive. A push above the wave (i) high will likely make calls for 130.00 come out of the woodwork. Of course, once a new high is seen, we’ll be looking for a much bigger top and turn back down.
Unfortunately, the rally up from the suspected wave 2 low isn’t clearly impulsive. In fact, it appears to be more of a correction, which suggests a more complex wave 2 may be underway. So, perhaps prices will fall back towards the wave 2 low prior to a more sustained advance. A push above the down trendline would likely mean that our top count was correct, and that either a leading diagonal has kicked of wave 3, or a series of ones and twos. Clearer counts present themselves elsewhere for now.
USDCHF is in a similar position to USDCAD. The action up from the wave (ii) low isn’t a full impulse yet, although it does look like there’s a clear third wave impulse internally to the rally. So, we await clarification here, although we still can’t rule out a deeper wave C. If indeed we see a minor crisis develop as a result of Greece on Monday, it seems like the franc is set to suffer some c consequences rather than get a “flight to quality” bid. That would certainly be a change from the past, and potentially speaks to the absurdity of having the Swiss national bank, or any central bank own stocks.
It does seem that the world’s monetary authorities have taken currency weakness to its logical extreme - buy anything with currency conjured out of thin air. However, if the intent is to grow an economy, you’d think that the geniuses running central banks would understand that buying a stock in the secondary market has NO impact on the company or economy. It simply exaggerates an existing trend. This is the reason that central banks and governments should allow private currencies; they should not be in the business of demanding by fiat that its citizens use one particular currency over any other.
on fxcm just now eur/jpy just plunged over 300 pips. market isn’t even open yet.
stupidly i had a pending order sitting and it got raped.
good thing it was only on demo, and for some reason i only lost 10 pips when my stop loss order was for 30. i have no explination for this. i would have thought i would have been taken for the full 300 …or until the market officially opens.
thanks for the feedback, but in the pic i supplied here i honestly cannot see the 5 wave move down from 150. it looks like a 3 wave move down to my C. i did relabel that chart during the week [but used the one hour] and i had lots of abc/xyz in there… but i guess i was wrong as price plunged down. the funny thing is, i still made more money than i have lost on elliot wave despite being wrong. i don’t know if this is luck …or if being wrong can frequently produce good results regardless…
Yes, sometimes XYZ will turn out to be leading diagonals. It’s important to know that Elliott appears, at times, to allow you to “know” what a market will do. But, that knowledge can lead to stubbornness and overconfidence, which as traders we must avoid. There is never a wave count that is 100% probable. Even the best, cleanest counts, in my mind are 95% probable. There’s always an alternate you can force in at a 5% probability. This is important for several reasons. #1 it gives your ego an out. #2 it forces traders to recognize that the market can do what it wants, and Elliott sometimes can only “explain” it in hindsight.
But we’re traders, not pure Elliott analysts. So, we’re going to step aside on a break of the wave (ii) low and await a reversal back above trendline resistance. There’s plenty of upside to be had here to await further clarification. Notice that the shorter term RSI is telling a bearish picture, and given the Greek vote, and most uncertain outcome, there’s risk to our bullish call. We’ll be here early next week for a short update if we see something worth mentioning, like last week.
The story is similar, but more bullish here in GBPUSD, as told by daily RSI. Notice that into the wave ((A)) low RSI had a bullish divergence, and it was above the “Sustainable Bear” territory (lower grey zone). Then, into both the wave (A) and 3 highs it made it to “Sustainable Bull” territory (upper blue zone). That has us looking at action down as a correction, and since prices are near trendline and structural support (Nov '14 lows & (4) high), this is a natural level to look for a turn back up. In addition, there’s no default risk here, so the pound is likely a better pair to play for a reversal of the “USD policy divergence” idea.
While prices are below the short term down trendline, we need to allow for a deeper wave 4 or potentially wave (B) correction. But, with support so close, we’re still going to maintain our near term bullish outlook, although we’re not likely to put any capital behind such an idea until we see a push above the down trendline.
Support once broken, become resistance. As such, there’s plenty of reasons to remain bearish AUDUSD. The count isn’t complete, yet, and the Sustainable Bear reading on daily RSI keeps things pointed lower down under. Perhaps the commodity bear market keeps Aussie rates heading lower, and thereby, eliminating or reducing the interest rate differential. For years, both Australia and New Zealand have had significantly higher rates than the rest of the developed world, in part based on their current account deficits (i.e. they needed to keep rates high to attract foreign capital). With the bulk of Australia’s exports being commodities (coal, iron ore, copper) that bear market is extolling its toll in the forex markets.
We’ve added some short term labels to illustrate the potential downside here. Even if the AUDUSD decline is terminal, a .618 extension off the wave B high points to the .71 handle. The only action that will give us pause, and suggest something less bearish would be an impulsive rally back above the down trendline and .7633. Until then, continue to look lower.
Here too, daily RSI is in Sustainable Bear territory, which means any bounce is likely to be corrective. Still, even a wave (iv) bounce could see a 250 pip rally. Do keep in mind, though, that a Sustainable Bear reading doesn’t mean rallies can’t happen; it only means that a new low will be seen in excess of 75% of the time.We’re not looking to play a bounce here, instead, we’ll be looking to sell the next rally for a trade into the wave C low. Look for the down channel to provide resistance, and the lower line to provide support. In addition, the 100% expansion of the wave B rally is just below current levels.
Even with the sell off from the high, USDJPY is still above both its up trendline from October and the breakout level (wave (3) and B of (4) highs). Daily RSI remains above sustainable bear territory, and given that the last reading was sustainable bull on both weekly, monthly and daily charts we’re sticking with the idea the current action down from the top is corrective. However, the yen has been used as a “funding vehicle” for carry trades around the globe - from John Mauldin and Kyle Bass’ yen mortgages, to Japanese housewives using AUD and NZD deposit accounts, and people coming to the realization that Abenomics outcome is a decimated yen.
So, many people agrees that the yen’s future is doomed. We agree too, but first, we think there is going to be a downward correction towards the 105 level. But, that’s only after one of two things happens: 1. A new high for wave 5 of I is seen, or 2. A break of the up trendline and the wave 1 top occurs.
Notice that last week’s late rally failed right at the down trendline. A break of either trendline will likely point the direction of trade for at least a week or two. Beware a pop and drop after a new high is seen, though, as prices might not have enough left in them to reach the 127 level.
USDCAD bottomed near up trendline and Fibonacci support, and the rally since looks like the resumption of the uptrend to new highs. Critical support is now the wave 2 low, as a break of that level would put us well below trendline support. Until that happens, we’re sticking with the bullish view, and notice that RSI is very near Sustainable Bull territory. Any weakness is an opportunity to join the bulls.
USDCAD bottomed near up trendline and Fibonacci support, and the rally since looks like the resumption of the uptrend to new highs. Critical support is now the wave 2 low, as a break of that level would put us well below trendline support. Until that happens, we’re sticking with the bullish view, and notice that RSI is very near Sustainable Bull territory. Any weakness is an opportunity to join the bulls.
That’s all we really know. There is a budding up trend, but there are easier ways to play a dollar rally if that’s what’s going to cause the rally here (AUD, NZD & CAD). The reflex seems to be to buy francs on any “negative” Greek news, even though the franc is very far from a “hard” currency these days. It’ll take a break of the up trendline, though, to alter the near term bullish view.
The pound looks much better versus the dollar than the euro. In fact, this last week’s rally leaves a clear three wave decline from the wave B top. As such, we’ve switched the alternate count to an even more bullish take than the top count. It suggests that wave (B) is complete in an expanded, running flat. As Laszlo writes in that post, running flats occur in markets that are, “on the move.” So, under both the top and alternate counts, we’re looking for a push above the wave B high from above the wave C low.With the way stocks reacted to the Greek deal and Chinese stimulus this week, we’re don’t foresee immediate significant USD weakness, so the top count remains best. But, we’re not fighting higher prices here, especially given RSI’s turn up from above the Sustainable Bear zone.
The idea of a euro selloff a few weeks ago was based on contagion from a Greek default. But, that theory was deemed false as EURUSD sold off this week on news of a Greek “deal.” So, apparently the euro will sell off on either a default or deal, right? Certainly the consensus call is for further euro weakness, and the fall back below the red up trendline drawn off the wave B low allows for this. In addition, the repeated breakdown from the longer term black down trendline speaks to a market whose trend is still down.
But, daily RSI has still not entered “Sustainable Bear” territory (lower grey zone), and prices have reached near the 1.08 level where prices bounced in May. An ideal scenario for us next week would be to see a spike lower followed by an immediate reversal. In order to put capital at risk on a swing basis, though, we’re going to need to see at least a daily candlestick reversal that has an internal five wave move and three wave decline.
Unlike daily RSI, 240-minute RSI has reached Sustainable Bear territory. That does give me pause with respect to the bullish outlook, since we could even see a test of the 1.06 area prior to a return to 1.14 in a combination or flat for wave ((B)). Wait for evidence of a low, such as the aforementioned five wave rally and corrective decline on an hourly chart.
Our preference is that the commodity currencies should be near to carving out a significant bottom. But, the action doesn’t count complete yet, and daily RSI remains in Sustainable Bear zone. That means odds favor any bounce being a correction, which would at least need a retest of the low prior to any sustainable bullish action. We remain bearish per the top and alternate counts.
Ideally, we’ll get some early week strength to complete wave iv of (iii). Prices should remain below the wave (i) low prior to completing wave (v) down, and only a rally back above that would suggest something less bearish was underway (such as an expanded flat for wave B, which would make the current low a (b) of B low). Without something clearly impulsive to the upside, though, we’ll ignore the fact that 240-minute RSI is diverging in a bullish manner. Use rallies as opportunities to join the bears, although we’ll want to be a bit more nimble since this downtrend is quite mature. See our site, or follow us on Twitter @TraderSkillset for more updates.
Here’s the roundup of the longer term bullish evidence. We have a five wave decline into the wave ((A)) low, an impulsive bounce for (A) that pushed above long term down trendline resistance and above wave (4) resistance. Prices have corrected lower in clear three wave moves for A, C and E of (B). Prices remain above the up trendlines off of the wave ((A)) and A lows, and right at former resistance, now support, from the wave (4) high. RSI has been flat near 50 after registering Sustainable Bull readings (upper blue zone) and bottoming above Sustainable Bear territory (lower grey zone). Add it all up, and we’re confident in a bullish outcome.
Here we see more detail of the corrective declines for A, C and E of (B). Now, we can’t say for sure that wave D and E are complete, per the top count, but it seems possible. Wave (i) isn’t a clear impulse, which means it’s either a leading diagonal, or it’s part of an ongoing wave D of a triangle for (B). If either of the top two counts are correct, it means that prices will rally above 1.6000 from above the wave C low at 1.5330. But, ideally, even if the triangle is ongoing, prices should remain above the red up trendline. We’re currently bullish given that the action down from the wave (i) high is corrective. Prices should remain above the wave (ii) low if the top count is correct. A drop below that would either mean a more complex wave (ii), or the triangle is still ongoing.
