Dollar Reversal -- Is It Sustainable?

[B]- Euro Turns at Fibonacci Support

  • Japanese Yen Hits Channel Resistance
  • British Pound Rockets Higher
  • Swiss Franc Bearish Channel (USDCHF Bullish)
  • Canadian Dollar Consolidates
  • Australian Dollar a-b-c Correction?
  • New Zealand Dollar Bullish Divergence

EURUSD - The C wave that we were looking for to challenge 1.3391 may have ended at 1.3414 this morning. The 61.8% of 1.3254-1.3680 is at 1.3417. A rally through the short term resistance line drawn off of the 5/16 and 5/21 highs and 1.3474 would lend confidence to this view. 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), as evidenced by the COT report. The wave structure favors one more high above 1.3680 in a 5th wave before an impulsive decline occurs. 1.3414 must hold in order for this near term outlook to remain favored.

USDJPY - The USDJPY continues one its one way train. Bearish divergence as well as RSI rolling over from above 70 (240 minute chart) gives scope to price rolling over. A break under the short term resistance line drawn off of the 5/11 and 5/18 lows near 121.36 is required to suggest that a turn lower has occurred. We are sitting tight for now but watching the USDJPY closely for any signs of a reversal.

GBPUSD - 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). There is potential short term trendline resistance near 1.9875. The most bullish outlook is intact as long as price remains above 1.9767. The 3 wave decline from 2.0131 is the dominant pattern and is bullish.

USDCHF - The longer term outlook for higher prices is intact, although the USDCHF may endure a period of softness as the pair trades down near support from the confluence of the 61.8% of 1.2124-1.2230 / channel support near 1.2203. Former resistance at 1.2221 could now be support as well. Watch the channel (shown below).

USDCAD - The 5th of the 3rd wave from 1.1168 may need to consolidate and then make one more low before the anticipated wave 4 bounce occurs. The hourly chart shows that wave 3 (of 5 of 3) is extended and that a dip below 1.0825 would complete 5 down from 1.1061. We should expect some consolidation under 1.0965 before yet another low before larger wave 4 occurs in a period of consolidation/pullback towards 1.1168. A measured objective for the end of the decline is at the 161.8% extension of 1.1168-1.0965/1.1061 at 1.0733.

AUDUSD - 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 .8256 remains intact. .8127 would be where wave C would equal wave A (55 day SMA at .8149). We are showing the EW count of wave C today. The rally from .8180 is in 3 waves (so far), so it is reasonable to remain bearish. If the rally traces out 5 waves, then we would need to reassess our position.

NZDUSD - The bullish divergence at today?s low accompanied by a break of short trendline resistance points to higher price for the NZDUSD. The next level to negotiate for bulls is the 5/21 high at .7316. We?ll assess the bullish potential as the pattern plays out but we are bullish against .7244.