Dollar Rally Impulsive - Best Opportunities against Euro and Swiss Franc

  • Euro In 4th Wave Correction
  • Japanese Yen Choppy and Unclear
  • British Pound Looking Bullish
  • Swiss Franc Closes Below Trendline (USDCHF Above)
  • Canadian Dollar Resisted at 1.1000 (USDCAD Supported)
  • Australian Dollar Remains Bullish
  • New Zealand Dollar Nearing Apex of Wedge

EURUSD - We were correct in labeling the decline from 1.3619 a 3rd wave down. A 4th correction is occurring now and will draw price under 1.3514 in a small 5th wave. The question is whether or not the 4th wave is complete at 1.3551. A more complex correction is possible (such as a triangle or a flat). The correction is unlikely to push above former congestion at 1.3564 and 1.3593 needs to hold in order to keep the bearish structure intact. Price closed under the 20 day SMA yesterday and the short term head and shoulders pattern is complete. Bearish targets going forward are the 100% extension of 1.3680-1.3533/1.3628 at 1.3480 and the 161.8% extension at 1.3389.

USDJPY - The USDJPY has held above the 20 day SMA (and the 10 day on a daily closing basis). Long lower daily wicks indicate strong buying interest at 119.50 and the outlook for a stronger dollar favors the upside. However, the rally from 119.52 is a 3 wave correction so far and MACD slope is negative, which is bearish. Technical signals are conflicting right now, telling us that there are better opportunities elsewhere. Still, coming under 119.52 sets the stage for an attack on the 100% extension of 120.46-119.52/120.08 at 119.14 (the possible A-B-C correction labeling is shown below).

GBPUSD - The rally from 1.9841-1.9974 is impulsive and the decline from 1.9974-1.9877 is corrective. This indicates that Cable is headed higher (as long as 1.9877 holds). Potential resistance is at the 100% extension of 1.9841-1.9974/1.9877 at 2.0010. Trendline resistance drawn off of 2.0131 and 2.0071 reinforces resistance near there. A break above the line exposes the 161.8% extension at 2.0092.

USDCHF - “The longer term wave structure is bullish as the decline from 1.2571 is a double zigzag (inverse of the EURUSD rally). A longer term inverse head and shoulders pattern (May 2006, December 2006, April 2007) is also visible.” We have been waiting for a daily close above the resistance line drawn off of the 2/12 and 4/9 highs, which held last week, before getting aggressively bullish. The USDCHF closed above the line yesterday, thus we are bullish against 1.1993. Ultimately, we expect this rally to span weeks (maybe months) and target 1.2571 The 10 day SMA crosses above the 20 day SMA yesterday as well.

USDCAD - After bouncing from just ahead of 1.1000, the USDCAD has rallied just shy of the 10 day SMA. 1.1000 is the 261.8% extension of wave 1 (1.1879-1.1562). With a measured objective at 1.1000, deeply oversold daily RSI, and ATR declining (from 79 to 72) since 4/30, it is likely that the USDCAD has put in an intermediate term low at 1.1005. A 4th wave correction will bring the USDCAD up to Fibonacci resistance near 1.1199-1.1318 before a 5th wave completes the bearish pattern below 1.0927.

AUDUSD - As long as .8242 holds, the AUDUSD structure is bullish short term. Rallying through the resistance line drawn off of .8390 and .8357 would bolster the outlook for a new high in wave 5 above .8390. A look at the daily gives perspective. It looks as if the 3rd wave that began at .7415 is extended thus one more high above .8390 would complete the larger 3rd wave and give way to a larger 4th correction. The longer term bias is bullish above .8168.

NZDUSD - The decline from the top (.7491) takes on the shape of a wedge and is bullish. A break through the top of the wedge near .7400 would signal that price is likely headed for a re-test of .7491. Friday?s candle is a hammer (bullish reversal) and supports this outlook. Last week?s low needs to hold (.7330) for bulls to remain in control.