Dollar Set to Weaken Near Term

• Euro 1.3047 is Bullish Pivot
• Japanese Yen Turns
• British Pound Reversal
• Swiss Franc 1.2375 Bearish Pivot
• Canadian Dollar May Have Turned
• Australian Dollar Entering a Wave 3?
• New Zealand Dollar Less Constructive than Aussie

EURUSD – It looks as if the 5th of 1 wave down is indeed truncated (meaning that it failed to break below the wave 3 low). We mentioned yesterday that “The bullish evidence that indicates a potential turn higher is the 5 small waves from 1.2876 to 1.2982. Price has retraced in 3 waves from 1.2982 to 1.2925.” A rally above 1.3047 would confirm a turn higher and give scope to the 161.8% extension of 1.2876-1.2982/1.2925 at 1.3098. A short term bullish bias is warranted on a push above 1.3047 and barring a break below 1.2982.

USDJPY – Our analysis that “The rally above 121.78 makes it possible to count 5 waves up from 117.97 so the USDJPY may be close to a short term top” is confirmed and a decline below 120.19. The pair is just above this level. A decline below 120.19 exposes the 38.2% of the 114.42-122.21 5 wave advance at 119.24. Our long term focus remains higher (towards a measured objective just above 128) but the near term picture is bearish as price has declined below the support line drawn off of the 12/5/2006 and 1/5 lows.

GBPUSD – We had measured support at 1.9455/61 but price reversed prior to reaching our level yesterday (low at 1.9482). The decline from 1.9915 is just in 3 waves, so we need to favor the upside. A break above 1.9698 bolsters the short term bullish bias. If 1.9482 was the bottom of a correction from 1.9915, then Cable may be in a 3rd wave higher right now. If this wave count is correct, then a strong Cable rally is imminent. Measured resistance is not until where the rally from 1.9622 would equal the 1.9482-1.9672 rally; this is at 1.9812. An extended rally probes the 161.8% extension at 1.9929. 1.9622 needs to hold in order to maintain confidence in the upside.

USDCHF – The USDCHF turned lower following the 5th wave rally to 1.2575. Expectations are for a 3 wave correction. A break below 1.2376 conforms that a short term top is in place. Fibonacci support begins at the 38.2% of 1.1880-1.2575 at 1.2309. Since this weakness is likely the beginning of a larger 2nd wave lower, expect a deeper retracement to challenge the 61.8% at 1.2146.

USDCAD – The USDCAD continues to trade sideways at the top of its yearly range. The 1.618% extension of 1.0927-1.1456 / 1.1028 is at 1.1883. 1.1883 is an ideal topping area for the USDCAD before the pair resumes its longer term downtrend to below 1.0927. The potential 2+ year bearish channel reinforces resistance at the current juncture. A decline below 1.1749 would confirm that the a 3rd wave (or C wave) down is in progress and that the USDCAD had already topped out. Measured support in this case would begin at where the decline from 1.1799 equals the 1.1847-1.1749 decline at 1.1700. The bearish structure is intact as long as 1.1799 holds as resistance.

AUDUSD – From yesterday “The AUDUSD has formed an ending diagonal since the 1/26 high at .7753. An ending diagonal is choppy and consists of overlapping waves. The structure often signals either the beginning or end of a move (in this case?the end). We have focused on the possibility that the decline from .7979 is simply a 3 wave correction. The decline from .7936 is the C wave of a an A-B-C correction from .7979. In this case, .7714 would be where the A and C waves would be equal. The pair did decline below .7714 this morning, but held at the 50% of .7414-.7979 at .7698. A rally above .7753 strongly argues that another leg up is in the works.” The rally above .7753 confirms the bullish structure and initial measured resistance is at .7811. An extended bull move targets the 161.8% extension of .7698-.7773/.7736 at .7858. .7736 is key support.

NZDUSD – We were looking for a decline to challenge .6778, which is where the decline from .7034 would equal the .7096-.6840 decline. However, given the convincing bounce from .6811 (yesterday’s low), we are inclined to place the end of a 3 wave (a-b-c) correction at .6811. .6811 needs to hold in order to keep this bullish structure intact. The short term wave structure is not as clear as AUDUSD (there are not a clear 5 waves up from .6811). Only a rally through .6918 strongly suggests that the path of least resistance is higher.