Dollar Correction Complete - Look for Resumption of Weakness

  • Euro Ready to Rocket Higher
  • Japanese Yen Approaches Trendline
  • British Pound Correction Complete at 1.9927?
  • Swiss Franc Short Term Triangle
  • Canadian Dollar Bull Trend Ready to Resume (USDCAD Down)
  • Australian Dollar Declines From Top of Channel Resistance
  • New Zealand Dollar Series of Higher Lows is Bullish


[B]Commentary[/B]: The push through 1.3437 signals that wave iii, of a 5 wave rally that began at 1.3261, is underway. An objective is 1.3656, the 161.8% extension of 1.3261-1.3437/1.3371. The decline from 1.3478-1.3414 is viewed as the 2nd wave correction of the smaller 5 wave advance from 1.3371-1.3478 (which is wave i of 3).

[B]Strategy[/B]: Bullish, against 1.3371, targeting 1.3656

[B]Commentary[/B]: The pullback that we were looking for towards the “channel support line, drawn off of the 4/19 and 6/8 lows, near 122.00/15” is taking place right now. The longer term bull trend is bullish above 120.76. Coming under 120.76 (as well as channel support near 122.00) would indicate additional bearish potential.
[B]Strategy[/B]: Look for bullish opportunity close to 122.00/15 channel support, stop and reverse just below 120.76

[B]Commentary[/B]: We wrote yesterday that “we are still looking for a bigger pullback, to channel support near 1.9885/9900.” Cable has pulled back but has not reached channel support. Still, it is likely that the pullback is complete as 3 waves are visible and impulsive upside action is visible on the very short term charts. The correction that just played out is most likely a 4th wave in the 5 wave sequence from 1.9621. A 5th wave rally is expected to register a new high (above 2.0014) and potentially 2.0130 before a reversal. Wave 5 (from 1.9927) would equal wave 1 at 2.0086 (measured objective). Since the rally unfolding will be a 5th wave rally and the euro is embarking on a 3rd wave rally, there is considerable upside potential for the EURGBP.
[B]Strategy[/B]: Move to flat (better opportunity in EURUSD).

[B]Commentary[/B]: As mentioned here yesterday, “the decline from 1.2424 looks more like a 3rd wave than a wave c, thus we are abandoning the bullish stance. Near term, it looks like a 4th wave correction is unfolding.” It is clear now that the 4th wave is unfolding as a triangle. A thrust lower in a 5th wave is expected. A larger upward correction is expected following a decline below 1.2258 so now is not the time to get bearish (unless you?re looking for a very short term move).
[B]Strategy[/B]: None

[B]Commentary[/B]: There is no change to our outlook for the USDCAD as price is close to testing channel resistance. We are expecting wave 4 to end this week (may already be complete). “Price is approaching potential channel resistance, which is just below 1.0800. We are looking for this correction to continue towards channel resistance before a 5th wave decline brings the USDCAD below 1.0548.”

[B]Strategy[/B]: None

[B]Commentary[/B]: We wrote yesterday that “if the rally stalls in the .8515/31 area (or before), then we will assume that the rally from .8332 is the b wave in an irregular flat correction. The next move would be a decline towards .8332.” The decline ended this morning at .8373 and looks like a sharp 2nd wave correction. The very short term charts (like the EURUSD) show impulsive upside action. As such, it it likely that a low is in place at .8373 and that price is headed higher (above .8510) over the next few days. We?ll look for targets in the days ahead. A rally through .8421 would increase confidence in the bull argument.
[B]Strategy[/B]: Bullish now, against .8373, targets TBD

[B]Commentary[/B]: The decline from .7690 to .7584 is in 3 waves so far but a rally through .7635 is needed to instill confidence in the upside again. The AUDUSD pattern is much clearer. Considering that the two currencies are highly correlated, a cautious bullish stance is reasonable. The longer term bull is intact above .7452.

[B]Strategy[/B]: None
JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTRENDLT is the longer term trend and uses the last 4 weeks of price data. JTRENDST is the shorter term trend and uses the last 5 days of price data. An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.