The dollar continues to fall. The EURUSD is approaching our onjective near 1.5400. Fibonacci extensions are also at 1.5429 and 1.5447. With price so close to this level, reversal potential is high. Still, there is no reason to fade this market until we see evidence of a reversal. If we do see this evidence, we will publish commentary about it at DailyFX+.
We maintain that wave 5 within the 5 wave rally from 1.4438 is nearing completion. Wave 5 would equal wave 1 at 1.5391, not far today’s high so far. This is our favored count as long as price is above 1.5146. If we see a 5 wave drop on a short term (15 min) chart, then we’ll discuss it at DailyFX +. For now, there is no sign of a reversal and no reason to fade the trend.
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The drop to 102.64 probably completed 5 waves down from 108.22. When wave 5 fails to register a new price extreme for the move (as happened here because the wave 3 low was 102.62), the 5th wave is termed ‘truncated’. Expectations are for this corrective rally from 102.64 to reach the 38.2% of 108.22-102.64 at 104.77 (former congestion as well) before the next bear leg begins. Wave C of the a-b-c rally should begin soon.
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We are counting the rally from 1.9361 to 1.9946 as 5 waves (truncated) and larger wave 1 of C from 1.9361. Wave 2 completed at 1.9719. Very short term, 5 waves up from 1.9719 might be complete as wave i of 3 of C. If this is the case, then wave ii should bring price back to the 50%-61.8% zone of wave i; which is 1.9849/89. Look for longs in this area. The target will not be until at least 2.03 (emphasis on ‘at least’).
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STRATEGY: Look for longs in 1.9849/89 zone, against 1.9719, target is probably near 2.04/05.
The correction that we were looking for in the USDCHF (to test at least 1.05) appears to have ended at 1.0458. The pair has already registered a new low (below 1.0307) but the form of the decline tells us that there is additional downside potential. As long as price is below 1.0427, expect the USDCHF to test 1.0230 (1.618 extension).
Recent commentary focused favored “a bullish bias against .9710.” As the pattern changes, so too does our bias. The decline from .9976 to .9818 is best counted as an impulse (5 waves) and the preceding rally can be counted as a double zigzag (a-b-c-x-a-b-c), which is corrective. As such, a bearish bias is warranted against .9976.
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STRATEGY: Bearish, against .9976, target TBD
We view the decline from .9496 as wave 4 within the 5 wave advance from .8512. Price is expected to exceed .9496 in the next few weeks and possibly test parity before a major reversal occurs. Within the 5 wave rally from .8512, wave 1 is 588 pips, and wave 3 is 622 pips. Wave 5 could be extended or could be close to the lengths of wave 1 and 3. This places the end of the AUDUSD rally near at least .9800-.9900. Near term, there are 5 wave up from .9218, so look to get long near structural support near .9300. Risk is .9218.
STRATEGY: Look for longs near .9300, against .9218, target TBD
[B]The short term count in the NZDUSD is eluding us but given the call for a AUDUSD strength (after a brief period of consolidation/weakness), look for Kiwi strength. We are showing the daily today since the short term chart is not so clear. Since the top in July at .8108, we contend that the NZDUSD is tracing out a large expanded flat. Wave B of the flat could test .8504 (127% of A) or .7634/69 (100% extension of a within B and 138.2% of A). As of now, risk is at .7921.[/B]
STRATEGY: Bullish, against .7921. target .8499
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Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]
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[1] STRATEGY is a quick summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughout the week; these are published at separate articles at DailyFX.