The down-up sequence since 1.5904 suggets that a large correction is underway in the EURUSD; either a flat or a triangle. In the case of a flat, price would come below 1.5342. In the case of a triangle, price would come below 1.5510 but remain above 1.5342. 1.5895 is the bearish line in the sand.
The rally through 1.5700 negates out very bearish count that called for the EURUSD to drop in a small 3rd wave. However, there is still a strong case to be made for the EURUSD come under at least 1.5510. Both legs of the down-up sequence from 1.5904 are not clear impulses. This makes it likely that a larger correction is underway; either a triangle or a flat. In either case, waves A and B are complete and wave C is underway towards lower prices. In the case of a triangle, the EURUSD would come under 1.5510. In the case of a flat, the EURUSD would continue to decline until dropping below 1.5342.
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An A-B-C correction should come to an end within the next few weeks. Wave C is viewed as underway from 98.56. Wave C would equal wave A at 103.88, very close to the former 4th wave extreme at 103.58. Near term support is near 101.50. View our Yen and Dow special report for more on the USDJPY.
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We wrote yesterday that “price either continues to drop with 1.9898 remaining intact or the GBPUSD exceeds 1.9898 and tests close to 1.9960 (confluence of the 50% of 2.0191-1.9728 and former congestion) before the decline resumes. Both counts are bearish going into next week and beyond. The second scenario just delays the drop.” The second scenario is the one that has played out. Look for price to decline from the current level.
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STRATEGY: Bearish, against 2.0191, target 1.86
We had thought that “the rally from 1.0067 was wave iii of 3 of A” and that the USDCHF would continue higher with 1.0067 remaining intact. That has no happened as the pair broke below 1.0067. If the bullish count is correct, then the USDCHF is tracing out an expanded flat and price must remain above .9871. Potential short term support is .9983/1.0018.
We view the .9710-1.0324 bull leg as a wave 1 impulse within a 5 wave bull cycle (wave i of 1 is a diagonal). Therefore, wave 2 is underway now. Specifically, the drop from 1.0324 is wave a of 2. The wave 2 correction will probably continue for a few more weeks before ending closer to .9950 (61.8%) / 1.00 (former resistance). This is where we will look to get long.
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The long and short term patterns in the AUDUSD remain in conflict and we therefore are refraining from taking a strong stand one way or the other. As we noted yesterday, the up-down sequence from .8925 looks like a 5 wave advance and 3 wave decline. This count warrants a short term bullish bias against .8925.
[B]There is no change to the NZDUSD bearish count. “Our confidence in the bearish count that we proposed a few weeks ago has grown. We view the rally from .6639 to .8215 as a large expanded flat (A-B-C). Wave C of that rally is an ending diagonal (waves 1-2-3-4-5 are overlapping and each subdivide into 3 waves). Bigger picture, .8215 may be the end of wave B from .5927. Price is expected to eventually come under .5927.” Near term, the NZDUSD may pop above .7926 before the decline accelerates.[/B]
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[B]STRATEGY: Bearish, against .8101, target TBD [/B]
[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.