The USD has weakned as expected. Short term targets for the GBPUSD and EURUSD are at 1.97 and 1.57. Watch the USDJPY for a break as the pair makes its way to the lower end of its recent range.
There is little to add from yesterday when we wrote that “the push through 1.5570 confirms that our bullish stance is correct (and also confirms an inverse head and shoulders). The rally from 1.5283 could be a series of 1st and 2nd waves or wave i of a diagonal. Either way, look higher near term.” 1.5700/40 likely provides some resistance, which is a good area to lighten up on longs. Risk can be moved to 1.5486 (red line). Remember, there is the possibility that this rally will reach a new high within the next 3 to 4 weeks so longer term bulls should be patient.
STRATEGY: Bullish, against 1.5396, target TBD
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We remain bearish as long as the USDJPY is below 105.43. The potential for a sizeable decline in a 3rd of a 3rd wave within the bear cycle from 105.70 is what keeps us patient. This count remains favored but the alternate treats the consolidation since 105.70 as an X wave (probably will form into a triangle), which will lead to a new high in wave Z before the larger decline resumes.
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STRATEGY: Bearish, against 105.43, target TBD
The reversal that we forecasted the last few days is underway. “It is likely then that a complex correction (W-X-Y) is unfolding since the 1/22 low at 1.9337. A bullish bias is warranted against 1.9362.” Risk can now be moved to 1.9452 and the longer term target remains above 2.04 but it is wise to take some off of the table near 1.97 (100% extension and trendline).
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STRATEGY: Bullish, against 1.9452, target above 2.04
There is no change to the USDCHF pattern as the pair is tracking our preferred count. “We view the rally from .9674 as an A-B-C advance (corrective) but this does not mean that the larger downtrend is back underway (similar to the EURUSD). The advance may well be the first leg in a larger, more complex upward correction but a sizeable decline is expected regardless (probably into parity).” Risk can be moved to 1.0598
STRATEGY: Bearish, against 1.0598, target below 1.0389
We had mentioned in recent days that “the decline is expected then to continue until measured support, which begins at .9945 and extends until .9841. The larger bullish bias is valid against .9710.” The pair is in the middle of this zone. We’ll wait until we see signs of strength before committing to the bull side.
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The rally from .8952 is wave C of a 5 of the diagonal that was discussed above. This break to the upside could lead to a test of a target near 1 (.9936) before the larger reversal. Near term support is at .9510.
Kiwi has reversed in impressive fashion. The break through .7727 negates the near term bearish bias. There are 5 waves up from .7536 and a corrective decline to .7710, indicating with a high probability that the next leg up in the NZDUSD is underway. A bullish target is .7947 (100% extension).
STRATEGY: Bullish, against .7710, target .7915
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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.