In what could be a classic news spike low, the USDJPY dropped below 102 following this morning’s NFP release. There are 5 waves down from 104.18 and possibly 108.35. While there is no change to a call for lower prices in the coming weeks and months, a short term correction to 103 or even 104 is possible.
Wave 5 within the 5 wave rally from 1.4438 is nearing completion. Wave 5 has far exceeded where it would equal wave 1 at 1.5391. The next objective would be where wave 5 would equal 61.8% of waves 1 through 3, which is at 1.5635. 1.5370 should provide support near term and price is above 1.5290, expect additional gains.
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Remember that the larger wave count treats the current USDJPY decline as a 3rd of a 3rd of 3rd (see the Yen Bearish count from 2/29). Objectives are not until the 97/98 area. However, we’d like to present a count that suggest a 5 wave drop from 108.35 is complete (or close to complete). This does not change the long term bearish call for the pair to test the 1995 low near 80, but it does suggest that at least a correction is due; possibly all the way back to 104.
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While out short term timing skills have been off with Cable, the longer term call for a break through 2.00 is working. Near term, the GBPUSD probably continues to work higher towards the 50% of 2.1160-1.9337 at 2.0248. The next likely resistance point is the 61.8% at 2.0663. The rally from 1.9719 is viewed as wave 3 of C. These are usually vertical rallies such as we see now.
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We wrote yesterday that “the form of the decline tells us that there is additional downside potential. As long as price is below 1.0427, expect the USDCHF to test 1.0230 (1.618 extension).” The USDCHF dropped through 1.02 to hit 1.0134 this morning. Now however, it does look like a correction is due. There are 5 waves down from 1.0427, and possibly 1.1105. In the case of the latter, expectations are for an upward correction to reach 1.0458.
We wrote yesterday that “the decline from .9976 to .9818 is best counted as an impulse (5 waves) and the preceding rally can be counted as a double zigzag (a-b-c-x-a-b-c), which is corrective. As such, a bearish bias is warranted against .9976.” The USDCAD has fallen and the drop from .9976 could be the beginning of wave 3 lower within the 5 wave bearish cycle from 1.0197. The alternate count treats the up-down sequence from .9710 as waves a and b. Therfore, keep risk at 1.0197.
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STRATEGY: Bearish, against 1.0197, target TBD
We view the decline from .9496 as wave 4 within the 5 wave advance from .8512. Price is expected to exceed .9496 in the next few weeks and possibly test parity before a major reversal occurs. Within the 5 wave rally from .8512, wave 1 is 588 pips, and wave 3 is 622 pips. Wave 5 could be extended or could be close to the lengths of wave 1 and 3. This places the end of the AUDUSD rally near at least .9800-.9900. Near term, the up-down sequence from .9218 could be wave i and ii of a 5 wave bull cycle (larger wave 5). Maintain a bullish bias against .9218.
STRATEGY: Bullish, against .9218, target TBD
[B]The short term count in the NZDUSD is eluding us but given the call for a AUDUSD strength (after a brief period of consolidation/weakness), look for Kiwi strength. We are showing the daily today since the short term chart is not so clear. Since the top in July at .8108, we contend that the NZDUSD is tracing out a large expanded flat. Wave B of the flat could test .8504 (127% of A) or .7634/69 (100% extension of a within B and 138.2% of A). As of now, risk is at .7921.[/B]
STRATEGY: Bullish, against .7921. target .8499
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[1] STRATEGY is a quick 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.