Dollar Countertrend Decline Should Last a Few Days

A countertrend Dollar decline should be underway towards EURUSD 1.5083, GBPUSD 1.5250, and USDJPY 107.90.

The EURUSD reached 1.4815 this morning. The drop from 1.5701 is in 5 waves and is most likely wave 3 within a 5 wave drop from 1.6039. A corrective 4th wave advance is expected to unfold over the next several days. 4th wave usually reach at least the 4th wave of one less degree (1.5083 in this case). The 38.2% of 3 is also a common terminal point for 4th waves (1.5155 in this case).

Bigger picture, we maintain that wave Y (the third wave in a 3 wave advance from 95.72) is underway from 103.76 and will end in the 113.25-116.65 zone (Fibo levels from the 124.13-95.72 drop) and give way to a long term reversal. The rally from 103.76 is probably the first zigzag in a double zigzag (as wave Y), so expectations are for a drop to reach the 38.2% of 103.76-110.40 (107.86).

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The bigger picture path for Cable is quite clear. That is, the break below 1.9337 signals that at least a C wave is underway towards 1.85. Near term, the pattern is not as clear as the EURUD from the top but a 5 wave drop is evident from 1.9928. As such, expect a countertrend advance. The initial objective is 1.9255 (former 4th wave) although there is potential for the rally to end closer to 1.9335 (this happens to be the breakdown point of 1.9337…former support becomes resistance).

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The USDCHF has nearly reached the initial objective (already) of 1.0986 (the 100% extension of .9647-1.0624/1.0010. As is the case regarding the other USD pairs, expect a countertrend movement (in this case a decline) to at least 1.0741 (former support).

1.05 and 1.08 were the two objectives that we had cited for the terminus of the USDCAD bullish triangle break. 1.0726 was reached today, close enough to the objective to begin thinking about looking for a top. Even if this is not ‘the’ top (end of the advance from .9055), then we would still expect a deeper decline from current levels. Support begins at 1.0569.

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The AUDUSD decline is nothing short of impressive. The pair nearly got through .87 today, reaching a low of .8703 this morning. Similar to the EURUSD and GBPUSD, a small 4th wave correction should unfold over the next several days. The initial objective is at .8952.

Short term, the NZDUSD is expected to advance (albeit correctively) to at least .7082. There is the chance for a much larger advance to unfold as initial fibo resistance is not until .7245.

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