The EURUSD is 250 pips off its high, but this is most likely just the beginning of a much larger (and much needed) correction. Expectations are for price to reach at least 1.4900 in April. The first zone of resistance 1.5700/30.
The EURUSD bullish boat got a bit too full and has tipped over (finally). Our best longer term count treats the decline from 1.5904 as wave 4 (within the 5 wave advance from 1.2865) of III (within the 5 wave advance from 1.1638). Typically, 4th waves retrace about 38.2% of wave 3 of the same degree; that would place the EURUSD near 1.4894. Another common occurrence is for price to come back to the center of the triangle that the break occurred from. That places the EURUSD near 1.4650 (very close to the 50% at 1.4582). Near term, there may be 5 waves complete from 1.5895. If so, then 1.5700 should provide resistance. It is also possible that the EURUSD extends lower immediately.
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STRATEGY: Bearish, against 1.5895, target will be in 1.46-1.49 zone
Recent commentary noted that “the up, down sequence from 95.72 is counted as waves A and B from 95.72. Expectations are for wave C to exceed 100.44 and test the area of the former 4th wave in the 101.40-103.60 zone.” The USDJPY pattern has remained intact and 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. Risk on longs can be moved to 98.56.
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STRATEGY: Bullish against 98.56, target 103.40
The GBPUSD bearish pattern has remained intact. “Bigger picture, we view the decline from 2.1160 as wave (A) in a larger A-B-C correction. Wave (B) was a clear 3 wave countertrend rally that ended just shy of the 61.8% level of A. Wave © is underway now and specifically, wave 1 of © is underway now. The longer term (8 to 12 weeks) target is near 1.8500.” As long as price is below 2.0191, we maintain that large wave C is underway from 2.0396.
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STRATEGY: Bearish, against 2.0191, target TBD
Recent commentary was “the rally through 1.0051 strongly indicates that a low is in place at .9647. Similar to the EURUSD (but as the inverse), the rally from .9647 is probably a larger 4th wave. Expectations are for the rally to reach the 1.0730-1.1121 zone. Also like the EURUSD, the rally from .9647 is likely a series of 1st and 2nd waves. Under this count, the rally from .9868 is wave iii of 3 of A.” .9868 was survived as yesterday’s low was at .9871. Keep risk at .9871
STRATEGY: Bullish, against .9871, target TBD
“What was previously our alternate count is now preferred. The drop to .9710 completed an expanded flat from the December high at 1.0248. It is highly probably now that a multi-year low is in place at .9055. Objectives for the bull move that began at .9710 are near 1.09 and 1.1600.” Near term, we expect price to drop to at least 1.0093. This would present a bullish opportunity.
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A major top may be in place at .9496. Treating the rally to .9470 as a truncated 5th wave supports this outlook. However, confidence in the larger bearish picture is low right now since we can count a 5 wave rally from .8952 to .9240. A 3 wave correction may be complete at .9075. Under this count, a short term bullish bias is warranted against .8952. With the long term and short term patterns in conflict, we will stand aside.
[B]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 drop below .7865 confirms (with a high probability) that a 3rd of a 3rd wave is underway from .8215. Risk on shorts can be moved to .8101. [/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.