Dollar Rally Has Impulsive Look

• Euro 5 Waves Down
• Japanese Yen Fibonacci Support (USDJPY Resistance)
• British Pound Sinking
• Swiss Franc Testing Range Limits
• Canadian Dollar Digesting Gains
• Australian Dollar Tests .8200
• New Zealand Dollar Short Term Head and Shoulders

EURUSD – The EURUSD is playing out as expected. “We are looking for a significant top due to the 7 wave rally from the November 2005 low at 1.1640. 7 waves is really just two 3 wave structures linked together by an X wave. This is known as a double zigzag and is a countertrend movement.” The terminal thrust from the triangle is complete and there are 5 waves down from 1.3439 to 1.3352. The bounce that has followed should give way to another impulsive decline towards the 3/26 low at 1.3254. The 61.8% of 1.3439-1.3352 at 1.3406 is resistance. Daily CCI is divergent with the recent high and has declined below 100.

USDJPY – The USDJPY has continued to rally as expected but with 5 waves up from 116.37 and the specter of the 61.8% of 122.17-115.14 at 119.48 looming, the possibility of a period of softness / consolidation should be considered. 240 minute RSI has crossed above and below 70 as well. The 5 waves up could be the C wave and end of a correction or the beginning of a new uptrend. A break below 118.43 favors the former scenario.

GBPUSD – We are still looking for a deeper decline to challenge at least the area of prior 4th wave support at 1.9545. The reason for our bearish view is the appearance of the completion of 5 waves up from 1.9182. The break below trendline support on Friday instills confidence in this view. 1.9668 is very short term resistance. The weekly chart hints at a more significant reversal. Last week’s candle was a shooting star and a triple top is evident with the December 2006, January, and April highs.

USDCHF – The short term subdivisions have cleared up with the USDCHF tracing out a small 5 wave advance from 1.2122 to 1.2232. A small consolidation may have already occurred but a dip should be short lived with Fibonacci support beginning at the 38.2% of 1.2122-1.2232 at 1.2190 (the 61.8% is at 1.2164). A rally through the 3/30 high of 1.2238 signals a bullish breakout and shifts focus to the 3/9 high at 1.2354.

USDCAD – There are 2 assumptions two scenarios that we are working with. There are 5 waves down from 1.1828 but that may be the end of a correction (an A-B-C from 1.1879) rather than the beginning of an impulsive move. The declines continue to exhibit impulsive characteristics, but a clear break of parallel channel support is required before we can get aggressive. If the next larger move is down, then 1.1543 should act as solid resistance.

AUDUSD – We still maintain that the AUDUSD is nearing the latter stages of a long term rally. With 5 waves up from .7678, we expect at least a correction back towards the previous 4th wave low at .8028. Both daily RSI and CCI have rolled over from overbought levels, signaling a reversal. With an impulsive decline from .8201 to .8150, we can get bearish against .8210.

NZDUSD – The rally from the May 2004 bottom to the March 2005 high lasted 44 weeks. The decline from the March 2005 high to the June 2006 low lasted 68 weeks. The rally from the June 2006 low has lasted 41 weeks (41st week ended on April 6th). Kiwi may be exhibiting a longer term rhythm with the 40-odd week rallies but the long term rallies and declines are also in Fibonacci proportion regarding time as 42/68 = .618. Short term, a head and shoulders reversal may be setting up as well. The neckline is just above the .7200 figure.