EURUSD Challenges High - Resistance Line at 1.3870

  • Euro Short Term Structure Bearish Below 1.3832
  • Japanese Yen - Look for Break Above 122.61
  • British Pound Trendline Resistance
  • Swiss Franc Range is Tight
  • Canadian Dollar Long Term Resistance Line (USDCAD Support) at 1.0385
  • Australian Dollar Ending Diagonal
  • New Zealand Dollar Should Decline in 4th Wave

Commentary: We wrote yesterday that “the ‘5 down? means that at least one more 5 wave decline is likely to occur. The correction from 1.3773 may extend higher, but should be contained by the 61.8% of 1.3832-1.3773 at 1.3809. An initial bearish target is 1.3700. The form of the decline will alert us to the bearish potential.” The bearish count remains on track as the rally from 1.3752 unfolded in a corrective 3 waves and 1.3832 remains intact. Coming under 1.3786 instills confidence in the bearish bias.

Strategy: Remain bearish, against 1.3832, target 1 at 1.3700, target 2 TBD

Commentary: The dominant pattern in the USDJPY remains the 3 wave decline from 124.13 to 120.97. As long as 120.97 remains intact, the structure in the USDJPY is bullish. Shorter term, the rally from 120.97 is an impulse and therefore likely wave 1 (or a) in a new 5 wave bullish sequence. A push above 122.61 gives scope to a test of 123.18, which is the 100% extension of 120.97-122.61/121.55. Longs should keep risk tight at this level.

Strategy: Bullish now, against 120.97, target a break above 124.13, target TBD

Commentary: After a brief spike through the resistance line drawn off of the 6/12, 6/20, 6/22, and 7/2 highs, Sterling has shown signs of reversing. The decline from 2.0547 may be just a 4th wave decline ina 5 wave rally from 2.0261. Coming under 2.0402 would eliminate this bullish count and indicate additional bearish potential. Remember, the psychological backdrop, as indicated by the COT report, remains ripe for a top and reversal.
Strategy: Flat

Commentary: We maintain that the USDCHF is forming a low. Similar to the EURUSD (but the inverse), the USDCHF rally from 1.1960 is an impulse (5 waves), indicating that the near term trend has turned to the upside. Initial resistance is at 1.2068 (trendline resistance is at 1.2090 as well) but the ‘5 up? from 1.2960 indicates additional bullish potential.
Strategy: Remain bullish, against 1.1960, target TBD

Commentary: We have been looking for a bottom due to speculative positioning and the longer term wave structure, which has an ending diagonal unfolding from 1.4000. The rally from 1.0400 is impulsive, indicating that the trend has turned. A bullish bias is warranted against 1.0400. An inverse head and shoulders pattern may be playing out in the short term as well. A rally through 1.0477 increases confidence in the bullish outlook.
Strategy: Bullish now, against 1.0400, target TBD

Commentary: We wrote yesterday that an ending diagonal may be unfolding but the potential for a turn is high, so we are moving to flat (previously bullish). The Aussie extended to .8808 this morning, which may have completed an ending diagonal from .8707. Coming under .8761 warrants a bearish bias for a return to at least .8707.
Strategy: Flat

Commentary: We are looking for a decline in a 4th wave towards the 7/11 low at .7714. Potential channel support is at .7758 today. Coming under .7907 indicates additional bearish potential in the near term.

Strategy: Flat
*JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTRENDLT is the longer term trend and uses the last 4 weeks of price data. JTRENDST is the shorter term trend and uses the last 5 days of price data. An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.