Dollar Rally Impulsive - Best Opportunities against Euro and Swiss Franc

  • Euro At Bottom of Range
  • Japanese Yen Looking Weak (USDJPY Strong)
  • British Pound Plummets
  • Swiss Franc Holds Trendline
  • Canadian Dollar Correcting In 4th Wave
  • Australian Dollar Through Resistance Line
  • New Zealand Dollar Choppy and Unclear

EURUSD - The EURUSD failed to fall below 1.3514 and left a truncated 5th wave (refers to a 5th wave that fails to fall below the preceding 3rd wave of the same degree. We must consider alternatives to the more bearish scenario that we have favor. One of these alternatives is that an A-B-C correction ended at 1.3514 (see chart below). A drop below 1.3514 encounters 1.3480 , which is where the A and C legs would be equal (and this would possible be the end of the A-B-C). If this is the case, then the EURUSD would register one more high (above 1.3680) before the big turn. Still, price remains below the confluence of the 10/20 day SMAs, which is resistance at 1.3585/86.

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. The next level of resistance is the 5/4 high at 120.46 and a rally through there exposes the resistance line drawn off of the 3/12 and 4/16 highs near 121.00. There is likely an abundance of offers near that line. 119.52 is critical support.

GBPUSD - The dominant pattern is the 3 wave rally from 1.9841 to 1.9997. This is a bearish pattern but today?s high at 1.9961 must hold in order for bears to remain in control. That pattern could very well be a B wave within a larger A-B-C decline from 2.0131. If this is the case, then Cable is likely to slip to the 100% extension of 2.0131-1.9841/1.9997 at 1.9709 before mounting any significant rally attempt. Again, 1.9961 is key. Moving averages favor the downside as the 10 day has crossed below the 20 day and the pair closed below the 20 day SMA yesterday.

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 two days ago and has held there, thus we are bullish against 1.1993. Ultimately, we expect this rally to span weeks (maybe months) and target 1.2571.

USDCAD - After bouncing from just ahead of 1.1000, the USDCAD has rallied to 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 between 1.1199-1.1318 before a 5th wave completes the bearish pattern below 1.0927.

AUDUSD - We wrote yesterday that “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.” The near term structure is bullish as well as the AUDUSD has rallied through a short term resistance line.

NZDUSD - Kiwi has been the quietest pair in the last few weeks as the decline from the top (.7491) takes on the shape of a wedge, which is a bullish pattern. A break through the top of the wedge near .7370 would signal that price is likely headed for a re-test of .7491. However, daily studies are bearish as evidenced by downward sloping oscillators and a recent bearish 10/20 day SMA cross.