Australian Dollar Reversal Evidence is Strong

-EURUSD time to go short drawing near
-GBPUSD tests former 4th wave but no evidence of top yet
-AUDUSD top in place?
-USDJPY bears in control below 96.70

Euro / US Dollar

I wrote yesterday morning that “the complex correction count, in which wave Y is underway from 1.2884, is the more likely candidate at this point. Near term, the decline from 1.3722 was confirmed as corrective (3 waves) when 1.3667 was exceeded. Near term structure is bullish above 1.3583. Coming under there would signal a bearish opportunity.” The EURUSD reached 1.3838 (an Elliott Wave extension is at 1.3840) in European trading before coming back slightly. Looking at very short term structure, one more high (just above 1.3838) looks likely in order to complete 5 waves up from 1.3420. Since neither wave 1 or 3 of the impulse is extended (wave 3 is slightly longer than wave 1 though), wave 5 could extend as high as high as 1.4100 (where wave 5 would = 1.618 x wave 1). Either way, I am on the lookout for a top and reversal IF price rallies above 1.3838. A drop below 1.3658 would suggest that a top is already in place at which point a bearish bias would be warranted against the high.

British Pound / US Dollar

There is no change to the bigger picture pattern in which wave 4 within the 5 wave decline from the 2007 high is nearing completion. Cable has tested a former 4th wave extreme at 1.5730. As I’ve mentioned many times, 4th wave price extremes are common reversal levels. However, short term structure does not look complete. As such, the GBPUSD likely subdivides higher and makes its way to 1.60.

Australian Dollar / US Dollar

I wrote yesterday that “wave v of C (and therefore wave C) as well as the entire rally from the October low is close to complete. The risk of a top and reversal is high.” I favor weakness and there is short term resistance at .7720. Coming under the ii-iv support line would significantly increase the likelihood that a top is in place.

New Zealand Dollar / US Dollar

The NZDUSD is lagging the AUDUSD. That the NZDUSD has not made a new high and the AUDUSD has may mark a non-confirmation…a divergence. There is divergence as well with daily RSI. Structurally, the NZDUSD rally from .5831 may be a truncated 5th wave (wave v of C in this case). I am on the lookout for a top and reversal.

US Dollar / Japanese Yen

The USDJPY is approaching 93.50…a break below there would completely clear the head and shoulders top that has formed since March. The triangle count that I have presented in recent days is still valid but becoming less probable by the day. At this point, remaining below 96.71 keeps the near term trend pointed down.

US Dollar / Canadian Dollar

Big picture, there are 5 waves up from the 2007 low of .9050. The decline from 1.3068 is the correction (either a b wave of a 2nd wave) of that advance. The first level of potential support is the former 4th wave extreme at 1.1459. Fibonacci support is then at 1.1060 and 1.0590. I wrote yesterday that “a drop below 1.1475 could complete a double zigzag (7 waves). The new low would create divergence with RSI as well so a low and reversal is possible within the next several days.” Although there is not enough evidence to suggest that a low is in place yet, strength is what I am looking for. If near term structure confirms a low (5 waves up), then I’ll turn bullish.

US Dollar / Swiss Franc

Whereas the EURUSD has yet to exceed its March high of 1.3742, the USDCHF has already dropped below its March low of 1.1157. In other words, minimum expectations have been met for wave Y. One more low could complete 5 waves down from 1.1265 and give way to a bottom and reversal. A rally above 1.1087 would suggest that a low is already in place.


Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.

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