Dollar Weakness Is Just the Completion of a Larger Correction

• Euro Nears 61.8% Fibo
• Japanese Yen May Have Completed Correction
• British Pound 5 Waves Up Followed By Correction
• Swiss Franc Test Critical Support
• Canadian Dollar 5 Waves Up (Down in USDCAD)
• Australian Dollar Nears Confluence of Resistance
• New Zealand Dollar Close to Trendline

EURUSD – As mentioned yesterday “the break above 1.3066 strongly suggests that 1.2876 marked the end of a bearish wave 1 at 1.2865.” However, the rally is likely nearing its terminus. Strong resistance lies ahead at a potential resisting trendline drawn off of the 12/5 and 1/2 highs. Fibonacci resistance is at the 61.8% of 1.3370-1.2865 at 1.3177. The next move down will be a wave 3 and likely powerful. The triangle in the B wave position within the A-B-C correction from 1.2865 favors the bearish bias. Triangles occur in B waves but not in 2nd waves. Thus, we are confident that yesterday’s rally was a C wave and not a 3rd wave. Only a break below 1.2865 confirms that wave 3 down is underway. Regardless, the EURUSD is much closer to a significant top than bottom.

USDJPY – We wrote yesterday, “In the event of a decline, look for initial support at the 38.2% of 119.96-121.66 at 121.01. This is also the 4th wave of one lesser degree (2/8 low)?a decline below 119.97 would possibly complete a 3 wave correction from 122.21 (wave A would equal wave C at 119.86). The USDJPY has satisfied minimum expectations and possibly completed the 3 wave correction from 122.21 at 119.78 today so a bottom is likely forming. A decline below exposes the next support level, which is the 38.2% of 114.42-122.21 at 119.24.

GBPUSD – The GBPUSD rally reversed at the resisting trendline drawn off of the 1/23 and the 2/8 highs at 1.9680. We are also looking for a long term top in the GBPUSD (like EURUSD) but the structure is not as clear. On the daily, an inverse head and shoulders pattern gives scope to another thrust higher. Key resistance going forward is the 61.8% of 1.9918-1.9401 at 1.9720 and the 78.6% at 1.9807. The 3 wave correction from 1.9918 favors another push higher as well – the 61.8% of 1.9401-1.9680 is support at 1.9508. 1.9401 needs to hold in order to keep the short term bullish structure intact.

USDCHF – The USDCHF is testing critical support at 1.2375. An A-B-C correction from 1.2575 may have ended at 1.2353. The A wave (1.2575-1.2380) is equal to the C wave (1.2555-1.2353). Resistance is at the 61.8% of 1.2555-1.2353 at 1.2478. The 3 wave decline favors at least a near term bottom. A decline below 1.2353 shifts focus to the 38.2% of the 5 wave 1.1878-1.2575 rally at 1.2310.

USDCAD – Friday’s turn lower likely marks the resumption of the long term downtrend. Long term focus is to below 1.0927. Since there are 5 waves down from 1.1879 (ending at 1.1628 this morning), so now is not the time to get short term bearish. A bounce to Fibonacci support could see the 38.2% at 1.1723 or the 50% at 1.1754 (which is also the 4th wave of one lesser degree).

AUDUSD – The AUSDUSD rally looks extended. The pair has stalled near the 61.8% of .7941-.7697 at .7847 and hourly oscillators exhibit bearish divergence. The rally from .7697 to now could be the end of a 3 wave correction, although the c wave is a bit longer than the a wave. At least a corrective setback is due. Short term Fibonacci support is at the 38.2% of .7707-.7862 at .7803 and the 61.8% at .7766. A level to watch is the confluence of the 78.6% of .7941-.7697 / trendline drawn off of the 1/3 and 1/23 highs at .7888.

NZDUSD – Kiwi is similar to AUDUSD but is closer to the equivalent trendline. The trendline drawn off of the 1/25 highs intersects with the 78.6% of .7038-.6769 at .6980 today and tomorrow. This level is likely strong resistance and a setback is viewed as probable. Initial support is at the low from today at .6919. A burst through .6980would be impressive and give scope to the 1/25 high at .7037.