Dollar Mixed - Bullish On Cable and Bearish on Australian Dollar (New Format)

[B]- Euro 1.3414 Key

  • Japanese Yen 120.50 Trendline
  • British Pound Impulsive Rally
  • Swiss Franc Channel
  • Canadian Dollar Headed to 1.0733
  • Australian Dollar Headed Below .8200
  • New Zealand Dollar Bearish Below .7403[/B]

Commentary: With the decline from the top looking corrective (as opposed to impulsive), and with the a and c legs of the correction close to equal (218 and 195 pips), there is potential for a sizeable rally as long as 1.3414 remains intact. Although reward to risk favors longs here in the short term, we are wary of getting bullish longer term due to the extreme sentiment (USD bearishness/Euro bullishness), as evidenced by the COT report. The favored wave count does favor one more high above 1.3680 in a 5th wave before an impulsive decline occurs. We are willing to take a bullish stand against 1.3414 if price trades to 1.3462 (before dropping below 1.3414) for an eventual retest of 1.3680.
Strategy: Bullish above 1.3462, against 1.3414, targeting 1.3680

Commentary: Is this the turn? The USDJPY has rolled over from just under 122.00 and declined below short term trendline support. Still, very short term intraday charts fail to show impulsive downside action and the decline from 121.86 is corrective so far and in a-b-c format. Risk is to the downside though as daily RSI has rolled over from above 70. We would be confident in the bear side in a break below the potential support line drawn off of 117.60 and 119.46. That line is near 120.50 currently and increases about 12 pips per day (see chart above).
Strategy: None

Commentary: Cable has turned up from just under 1.9700, leaving close to two equal legs from 2.0131 (2.0131-1.9841 = 290; 1.9997-1.9676 = 321). Bulls were thwarted at the line drawn off the 5/1 and 5/9 highs but the 3 wave decline from 2.0131 is the dominant pattern and is bullish. Allow for some consolidation in a small 4th wave and a small 5th wave to exceed 1.9892 before a more significant pullback. This pullback will offer an opportunity to align with the next leg up.
Strategy: Waiting for the scenario described above to play out for an opportunity to get bullish against 1.9676.

Commentary: The longer term outlook for higher prices is intact, although the USDCHF may endure a period of softness following the rejection at the 200 day SMA. Potential support is at the confluence of the 61.8% of 1.2124-1.2230 / channel support near 1.2203. Former resistance at 1.2221 could act as support also. Watch the channel (shown below). A break under the midpoint line of the channel would give short term bears an opportunity. High reward/risk bullish opportunities come to the forefront at channel support.
Strategy: Waiting to get bullish against channel support (near 1.2200)

Commentary: The 5th (from 1.1168) of the 3rd wave (from 1.1825) is in progress and our measured objective for its terminus is the 161.8% extension of 1.1168-1.0965/1.1061 at 1.0733. The larger 4th wave will occur following completion of this large 3rd wave from 1.1825. Oversold and divergent RSI (daily) supports our idea that a bottom is close.

Strategy: None

Commentary: We maintain that a C wave decline is underway towards the 100% extension of .8390-.8168/.8349 at .8127. Bears are in control as long as .8265 remains intact. .8127 would be where wave C would equal wave A. A break under .8168 would support our view. Daily oscillators are bearish with RSI under 50 and the AUDUSD has slipped below the monthly (long term) bear break level of .8228 (see table on page 1).
Strategy: Bearish against .8265 targeting .8127

Commentary: Naturally, Kiwi is in the same position as the AUDUSD. That is, a C wave lower appears to be unfolding from .7403. Wave C would equal wave A at .7161. .7314 is short term resistance but the bearish structure remains intact below as long as price is below .7403. In the 5 wave rally from.6719 to .7491, the 5th wave is extended. 5th wave extensions are sometimes fully retraced so there is the possibility that Kiwi does not find solid support until .7082 (close to the 50% of .6719-.7491).
Strategy: Bearish against .7403 targeting .7161 and .7082.