The pace of the US dollar rally has picked up and this should continue. In particular, the EURUSD and AUDUSD patterns are most clear. While not as clear, there are GBPUSD and NZDUSD counts that suggest substantial losses going forward.
As focused on yesterday, “5 waves down from 1.6018 confirms that the an important top is in place. The rally from 1.5554 is in 3 waves and is therefore corrective. 1.5694 may be the top of wave 2 (as shown above). The alternate count treats the rally from 1.5554 to 1.5694 as wave w in a larger w, x, y correction. Potential resistance on a push through 1.5694 begins at 1.5731.” The developments this morning make it likely that 1.5694 is the top of wave 2 since the EURUSD has already dropped below 1.5554. For wave 2 to end above 1.5694, the pair would have to trace out an expanded flat, which is more common in 4th waves. In summary, expect the EURUSD decline to accelerate in a 3rd wave.
STRATEGY: Bearish, against 1.5905, target below 1.5342
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
We still maintain that the larger trend is down. Although a push to measured resistance near 107.25 remains possible, a bearish bias is warranted against 104.82 since the structure of the advance from 95.72 satisfies requirements for a double zigzag (a complex correction that occurs often in 4th waves).
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STRATEGY: Bearish, against 104.82, target TBD
We are treating the drop from 2.0396 as a leading diagonal (wave 1 of C within the A-B-C decline from 2.1160). Under this interpretation, the GBPUSD rally from 1.9599 is wave 2 within the 5 wave drop (wave C) from 2.0396. Risk on shorts can be moved to 1.9964.
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STRATEGY: Bearish, against 1.9964, target below 1.9337
The USDCHF has not moved much since yesterday but the pair is nearing where the rally from .9871 would equal the .9647-1.0249 rally; at 1.0473. Look for resistance near there. Keep in mind that one longer term count suggests a rally back to the 1.10/1.12 level. There is also a count that gives scope to a new low though. At this point, reward/risk on either side of the market does not warrant a position.
We remain aggressive USDCAD bulls as advances since the .9055 low are in 5 waves and declines are in 3 waves. Near term, price should remain above .9998 and we will not even think about an objective until the pair has exceeded 1.0324. Near term, the advance from .9987 is a series of 1st and 2nd waves. As such, the rally should accelerate this week.
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STRATEGY: Bullish, against .9987, target above 1.0324
We wrote Friday that “the decline is in 5 waves, therefore the best strategy is sell strength against .9541. Resistance begins at .9373.” The pair has rallied to .9403, to the middle of the Fibonacci resistance zone and the drop from there makes it highly likely that a wave 2 (or B) top is in place. Near term resistance is at .9340/60.
STRATEGY: Bearish, against .9541, target TBD
Our preferred count has been that a 1st wave down from .8215 is a leading diagonal and a wave 2 bounce ended at .8033. The NZDUSD has dropped below .7781, which makes a strong case that a 3rd wave decline is underway. Bears can move risk to .7879.
STRATEGY: Bearish, against .7879, target TBD
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[1] STRATEGY is a summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughout the week; these are published at separate articles at DailyFX.