Dollar Holds Up - Could This Be a Signal of Pending Strength?

• Euro Ready to Dive
• Japanese Yen Channel
• British Pound Takes Out 1.9300
• Swiss Franc Changing Trend
• Canadian Dollar Set to Weaken
• Australian Dollar Correcting Lower
• New Zealand Dollar Set For a 5th Down

EURUSD – The EURUSD range has tightened to 1.3180-1.3220 as yesterday’s rally was rejected at the 78.6% of 1.3262-1.3072 at 1.3224. We have focused on the possibility that a 3 wave correction is unfolding from the 3/5 low at 1.3072. The 3rd leg of that correction (the c wave), consists of 5 waves from 1.3084 (see chart below). If our confidence in a bearish outcome is to remain high, then 1.3224 needs to hold as resistance. The pair has come under a short term supporting trendline, which increases confidence (that the pair is topping). Short term support is at 1.3156.

USDJPY – We said yesterday that “the break below 116.91 (just now) reinforces the bearish bias as the entire rally from 115.15 can now be classified as an A-B-C correction. Weakness should continue lower in a 5th wave to below 115.15. Support on a break below the 115.00 figure is the 12/5/2006 low at 114.44.” We’ll hold onto this view and see resistance at a short term trendline that comes in at 116.40/50. Key resistance for the short term bearish bias is the 3/12 low at 117.22.

GBPUSD – Little has changed regarding Cable. The pair has rolled over from the 50% of 1.9675-1.9182 at 1.9428. It is possible to count a 3 wave correction from 1.9182 (which makes up a 4th wave correction). What we are looking for this decline to continue to under 1.9182 in a 5th wave decline. Very short term resistance is at 1.9266. This level needs to hold in order to keep the most aggressive bearish count intact.

USDCHF – We mentioned yesterday that “a 5 wave decline is evident from 1.2357 to 1.2213, meaning that the larger trend is now down.” An ending diagonal looks like it is taking shape in a small degree 5th wave. This means that the bounce from 1.2143 may test short term channel resistance near 1.2200 before price comes under 1.2143 in order to complete a 5 wave bearish sequence from 1.2355. 1.2109 is support with a break lower targeting 78.6% of 1.1878- 1.2575 at 1.2028. Coming under 1.2143 satisfies minimum expectations for the short term decline so a larger correction may take place (back to 1.2250/60 – previous 4th wave) following a break below 1.2143.

USDCAD – We are suspending the longer term bearish outlook due to the impulsive rally off of 1.1679. We wrote yesterday that “the fact that this decline has yet to accelerate lower and the bullish divergence with RSI on the hourly are both causes for concern and a bounce to 1.1739 or higher is suggested near term by the 5 waves down from 1.1820.” A small 5 wave rally from 1.1679 to 1.1765 is evident with the chop lower undoubtedly corrective. Price is now likely to exceed 1.1879 is a 3rd wave and target the 1.2000 figure (61.8% of 1.2734-1.0927 at 1.2041) in coming weeks. Then, we will look for the BIG turn lower. Remaining above 1.1679 keeps the outlook intact.

AUDUSD – “A rally above .7880 would place 5 waves up from .7680 and possibly see a test of the 78.6% of .7950-.7680 at .7892. In this instance, we would be looking for a corrective move lower.” The correction lower is underway as evidenced by the impulsive decline from .7887. Short term, we should see a break below .7798 and potentially a test of the 61.8% of .7680-.7888 at .7759. .7887 needs to hold in order to keep the short term bearish structure intact.

NZDUSD – Kiwi’s bounce from .6833 this morning is most likely a corrective 4th wave that should give way to a 5th wave down to below .6833 in the near term. The pair needs to remain below .6918 in order to keep the bearish bias at the forefront. Longer term, weakness likely extends below .6720 with .6991 resistance remaining intact. Daily oscillators are rolling over and the 20 day SMA has contained rallies this week.