Dollar May Test Former High - and Soon

• Euro Resistance Holds
• Japanese Yen Loses Critical Support
• British Pound Turns Around in Front of 1.9750
• Swiss Franc Probes Former Low
• Canadian Dollar Ending Diagonal
• Australian Dollar Turns Over
• New Zealand Dollar Clouded Picture

EURUSD – We are still looking for a low to be made below 1.2865, which would be followed by a rally that will retrace a portion of the decline from 1.3367. See yesterday’s commentary for measured objectives and potential bottoming points for the EURUSD. The near term bearish structure remains intact as long as 1.3066 holds (and preferably 1.3029) as resistance. That said, the recent decline from 1.3029 may be the 3rd of the 5th wave that will eventually break below 1.2865. In fact, the 1.618% extension of 1.3066-1.2911 / 1.3029 is at 1.2779 – which is in line with our targets discussed yesterday.

USDJPY –We have said that 121.38 is critical to the bearish case and the USDJPY is probing that level right now. A break above indicates that the zigzag correction we previously thought was playing out is no longer. 122.21 is back in focus in this case as are the longer term implications from the break of the 8 year trendline. A break above 122.21 exposes a measured objective at 123.21, which is where the 114.42-119.67 rally would equal the rally from 117.97. Short term support is at 120.60.

GBPUSD – Cable continues to fake out traders as the pair looked poised for a test of 1.9750 before turning down. We’ll revert to our previous working assumption that projected support is not until where the decline from 1.9740 equals the 1.9915-1.9482 decline at 1.9307. 1.9740 must hold for the bearish structure to remain intact.

USDCHF – The USDCHF has held the 1.2375 level after testing it 3 times since 1/23. The string shelf of support has led to a rally in what may be the final 5th wave to complete a 5 wave sequence from 1.1878. The next bullish target is the 1.618 extension of 1.2271 – 1.1878 / 1.2110 at 1.2746. 1.2427 is initial support and price above there warrants an aggressive bullish stance. Only a decline below 1.2375 negates the bullish wave implications.

USDCAD – We have been calling for a major turn in the USDCAD to occur at or near the 1.618% extension of 1.0927-1.1456 / 1.1028 is at 1.1883. The pair reached 1.1873 on Friday and has turned down slightly. One more high, above 1.1873 would best serve the turn scenario. It looks like the USDCAD is unfolding in an ending diagonal from 1.1645. One more high would complete the 5 wave structure and potentially lead to a forceful decline. Only a break below 1.1645 suggests that the long term downtrend has resumed.

AUDUSD – The short term structure in AUSDUSD is rather bearish. An a-b-c correction appears to have taken place from the 1/31 low at .7698. The c wave would be equal to the a wave at .7791, which also happens to be the 38.2% of .7941-.7698. Also, the c wave has unfolded as an ending diagonal, an inherently weak pattern that often gives way to a forceful decline. A decline below .7743 confirms the bearish bias.

NZDUSD – We have concentrated recently on the fact that “Kiwi bounced from where the .7038 decline equals the .7099-.6841 decline. As such, we are left with just a 3 wave correction of equal legs from .7099. This structure is suggestive of a bottoming in NZDUSD (as long as .6769 holds).” However, the inability of the pair to hold above former resistance (now potential support) at .6868 gives scope to more bearish price action. A bullish outcome is possible as long as .6769 holds but the probability is not as great as it was yesterday when the pair broke above .6868. A neutral stance is warranted until things clear up. .6769 is the bearish pivot and .6896 the bullish pivot.