The US dollar has advanced across the board but there is no evidence that the greenback is at the forefront of a larger bullish move. Support in the EURUSD is in the 1.5570/1.56 zone. Expectations are now for a spike through 105.70 in the USDJPY to complete a triple combination correction from 95.72.
Our preferred count is in black, which is the bullish count (the advance from 1.5283 is unfolding as a diagonal). We expect a bottom to form near 1.5570, which is the 5/12 high (top of wave i). This level is defended by the 61.8% of 1.5396-1.5817 at 1.5557. The alternate (bearish) count treats the rally from 1.5283 as wave X in a large W-X-Y complex correction from 1.6018. In order for this count to become preferred, we would need to see a 5 wave drop from 1.5817.
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The push through 104.68 negates the bearish structure and we are looking for a spike through 105.70 in order to complete the entire rally from 95.72. A push through 105.72 would be wave Z from 102.57 in what is a triple combination correction (W-X-Y-X-Z). Resistance should be strong near 107.00. Short term support is at 104.50.
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The GBPUSD rally is unfolding as an impulse, which inspires confidence in our bullish bias that likely lasts for the next month and a half or so (see Pound Long Trade). The drop from 1.9850 is most likely wave 4 within a 5 wave advance from 1.9452 (it could also be a second wave in a series of 1st and 2nd waves). Support is likely strong near 1.97 (38.2% and congestion).
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STRATEGY: Get bullish near 1.9680/1.97, against 1.9623, target above 1.9850
We wrote yesterday that “with support holding at the confluence of the 38.2% of .9647-1.0624 / 3/24 and 4/18 highs, we must respect the possibility that a larger correction is underway from .9647. To this point, both legs (from .9647-1.0624 and 1.0624-1.0216) are in 3 waves. This action has all the earmarks of a larger correction. As such, we are standing down from the bearish bias for now.” If the advance from 1.0216 unfolds in 5 waves, then we’ll commit to the long side.
We should know very soon whether or not we are completely wrong in our assessment of the USDCAD. We’ve been bulls and waiting for a buying opportunity. We were given that opportunity as the USDCAD dropped into support from the 78.6% of .9710-1.0324 at .9841 last week; a 100 + pip move off of the low is nice but a push through .9997 would inspire confidence in the bullish count. The pair must remain above .9710 for us to remain bulls. Near term support is at .9868.
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STRATEGY: Bullish, against .9710, target above 1.0324
The rally from .8952 is wave C of a large 5th wave diagonal that could extend to a measured objective just below 1.00 in coming weeks (.9936). Look for support near .9509 (and the line shown on the chart). A bullish bias is warranted against .9290.
Our bullish target at .7915 was hit last night, therefore we are now flat. The rally from .7536 is in 2 nearly equal legs, therefore it is possible that an important top will form soon and that Kiwi will retrace all of this rally. If we se evidence of this, then we’ll bring it to the attention of readers.
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[1] STRATEGY is a 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.