The EURUSD ascent will come to an abrupt end, but when? A potential double top in the NZDUSD presents an opportunity for USD bulls.
We are concentrating on the rally from 1.5282; which we are treating as a 5th of a 5th. We wrote yesterday that “the rally looks very close to complete. In fact, a push through 1.5625 would possibly complete an ending diagonal from 1.5521. Coming under 1.5535 suggests that a top is in place.” A push through 1.5282 did indeed complete an ending diagonal but it is clear now that the ending diagonal completed the end of wave 3 within the 5 wave advance from 1.5282.
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We wrote yesterday that “we expect a rally near term. There are 9 waves down from 103.58 (which we are treating as the end of wave 4 on the chart above). Therefore, expect a rally to at least 101.69 and possible higher.” The USDJPY rallied but only made it to 101.23 before reversing lower. It could be that the USDJPY will extend lower from here; and make progress towards the longer term target of below 80. Another possibility is that an expanded flat is unfolding and that price will rally and exceed 101.23 in wave C of the flat.
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At this point, there are 3 levels that could produce a significant top; the 61.8% of 2.1160-1.9337 at 2.0463, the 161.8% extension of wave 1 of C at 2.0663 and the 78.6% of 2.1160-1.9337 at 2.0770. Watch for a reversal near these levels. Very short term traders can look to trade from the long side as long as price is above 2.0213.
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It looks as though the USDCHF will continue lower, even after piercing parity this morning at .9988. We do contend that the drop from 1.0352 is wave 5 within the 5 wave drop from 1.1105. Wave 5 could extend to the lower channel line near .9750/9800.
We maintain that the USDCAD will come under .9710 in the near future; the only question is whether or not this happens with .9981 remaining intact. If .9981 was a top, then the USDCAD should have accelerated lower by now. Since it has not, .9981 may be exceeded and price could test the 61.8% at 1.0011 or the 78.6% at 1.0093. Still, a longer term bearish bias is warranted against 1.0197.
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STRATEGY: Bearish, against 1.0197, target TBD
We maintain that wave 5 within the 5 wave bull cycle from .8512 is underway towards a new high (above .9496). Near term, expect price to remain above .9327. If .9327 gives way though, look for support near .9285.
STRATEGY: Bullish, against .9327, target .9800
[B]An ending diagonal is underway from the 1/22 low at .7494. Exceeding the wave 3 high of diagonal at .8214 would satisfy minimum expectations for wave 5. Today’s high is right at the wave 3 high of .8214. It is possible that this is the top of wave 5 and the entire rally from .6639. Under this scenario, larger wave C would begin now and eventually come under .6639. [/B]
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[B]STRATEGY: Exit longs [/B]
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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 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.