Australian Dollar Turning Over in C Wave ? Opportunity to Sell Across the Board

[B]- Euro Bounces Hard

  • Japanese Yen Decline Getting Tired (USDJPY Rally)
  • British Pound Decline is Convincing
  • Swiss Franc 1.2200 is Formidable
  • Canadian Dollar Rejected at 20 day SMA
  • Australian Dollar in C Wave Down
  • New Zealand Dollar Rally Clearly Imp[/B]

EURUSD - We wrote Thursday that “we must consider alternatives to the more bearish scenario that we have favor. One of these alternatives is that an A-B-C correction ended at 1.3514 (see chart below). A drop below 1.3514 encounters 1.3480, which is where the A and C legs would be equal (and this would possible be the end of the A-B-C). If this is the case, then the EURUSD would register one more high (above 1.3680) before the big turn.” With the pair turning higher from not far below 1.3480 (1.3462), bears remain on the defensive. A potential resisting trendline is at 1.3570 and the 20 day SMA is at 1.3584. Near term, a drop back to former 4th wave support at 1.3523 seems likely.

USDJPY - The USDJPY continues to hold above the 10 and 20 day SMAs but the structure of the rally from 120.00 is suspect. The rally is choppy and bulls face the risk of a pullback towards trendline support near 119.00. Coming under this line increases the bearish potential. The 78.6% of 122.17-115.14 at 120.67 is resistance. The head and shoulders on the daily warns of a reversal.

GBPUSD - The 5 wave decline from 1.9997 suggests that the trend has turned down. The rally from 1.9759 has also proved corrective, unfolding in 3 waves. The rally from 1.9759 may only be the first of 3 corrective waves though. Resistance on a rally through 1.9843 is at the 61.8% of 1.9997-1.9759 at 1.9906. Look to align with the downtrend on a bounce as the next leg down could be a 3rd wave decline. Coming under 1.9759 signals that the next leg lower is underway.

USDCHF - “The longer term wave structure is bullish as the decline from 1.2571 is a double zigzag (inverse of the EURUSD rally). A longer term inverse head and shoulders pattern (May 2006, December 2006, April 2007) is also visible.” We have been waiting for a daily close above the resistance line drawn off of the 2/12 and 4/9 highs, which held last week, before getting aggressively bullish. The USDCHF closed above the line last week, thus we are bullish against 1.1993. Ultimately, we expect this rally to span weeks (maybe months) and target 1.2571.

USDCAD - After bouncing from just ahead of 1.1000, the USDCAD rallied to the 20 day SMA but was rejected there Friday. Still, “1.1000 is the 261.8% extension of wave 1 (1.1879-1.1562). With a measured objective at 1.1000, deeply oversold daily RSI, and ATR declining (from 79 to 72) since 4/30, it is likely that the USDCAD has put in an intermediate term low at 1.1005. A 4th wave correction will bring the USDCAD up to Fibonacci resistance between 1.1199-1.1318 before a 5th wave completes the bearish pattern below 1.0927.” The decline from 1.1168 is most likely just the B wave of an A-B-C correction. One more rally leg should unfold before the USDCAD completes the longer term 5th wave under 1.0927.

AUDUSD - With the AUDUSD failing (so far) at the 78.6% of .8390-.8168 and with the rally from .8168 failing to appear impulsive, it is possible that a larger correction is playing out. As long as price remains below .8349, our favored view is that a C wave decline is underway towards the 100% extension of .8390-.8168/.8349 at .8127.

NZDUSD - We wrote Thursday that “Kiwi has been the quietest pair in the last few weeks as the decline from the top (.7491) takes on the shape of a wedge, which is a bullish pattern. A break through the top of the wedge near .7370 would signal that price is likely headed for a re-test of .7491.” The rally from .7249 is clearly impulsive and initial support is at .7361. Continue to look higher as setbacks should prove corrective.