The EURUSD hit a new high today and as of now, there is no sign that the bullish pattern is complete. A USDJPY bear leg that will drop below 95.72 is underway and resistance is in the 100.73-101.20 zone.
If 1.5673 was the bottom of wave E within a triangle, then wave E was especially small. Remember, E waves of triangles are usually sharp and have a tendency to penetrate the lower triangle line. The deep E wave fools most market participants into the thinking that a major reversal is underway. In other words, wave E of the triangle creates the psychology necessary for the terminal thrust. The triangle may not be perfect, but the form is there, so we must respect it. If 1.5673 was the bottom of wave E, then the EURUSD may carry to 1.6250; this is where the rally from 1.5673 would equal the widest point of the triangle (a common occurrence).
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We had thought that the USDJPY would reverse closer to 104 but the strong decline this morning may be the beginning of wave v within the 5 wave drop from 114.65. 5 waves down from 114.65 would complete larger wave 3 within the drop from 124.13. Resistance should be strong in the 100.71-102.20 zone.
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STRATEGY: Get bearish in 100.71-102.20 zone, against 102.93, target below 95.72
The inability of Cable to accelerate lower in a 3rd wave has us thinking of alternate scenarios. Bigger picture, we have been bearish due to the 5 wave decline from 2.1160 to 1.9337 and the 3 wave advance from 1.9337 to 2.0396. Therefore, expectations have been for Cable to accelerate lower in a C or 3rd wave. The pair has declined but in a choppy fashion. As long as price is below 2.0047, this bearish scenario remains a possibility. Resistance is in the 1.9850/95 zone. If 2.0047 gives way, then we’ll propose an alternate.
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STRATEGY: Bearish, against 2.0047, target 1.86
Our short term count was thrown off track with recent weakness. We would like to show the bigger picture for perspective. One count treats the drop from 1.1105 as wave 5 within a 5 wave drop from 1.3295. Under this count, a major low is in place at .9647 and the USDCHF will work higher over the coming weeks and months towards Fibo resistance; which does not begin until 1.0840.
Near term, the latest bull leg (.9710-1.0324) is a wave 1 impulse within a 5 wave bull cycle (wave i of 1 is a diagonal). We had previously treated the drop from 1.0324 as wave a in a larger a-b-c correction (wave 2) but the advance from 1.0018 is an impulse and is likely wave i of 3. As such, a bullish bias is warranted against 1.0018. Support should be just above 1.01.
STRATEGY: Get bullish near 1.0105, against 1.0018, target above 1.0324
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There is no change to the count that we outlined yesterday. “We are treating the decline from .9470 (which was a truncation) as a series of 1st and 2nd waves. This bearish count remains valid as long as price is below .9353. The sharp drop from just below .93 presents a shorting opportunity against .9353.”
STRATEGY: Bearish, against .9353, target below .8952
[B]The break through the short term resistance line as well as a potential 5 waves up from .7781 negates out bearish bias. In fact, a dip to .7918 would present an opportunity to get long Kiwi.[/B]
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[B]Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]
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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.