EURUSD Impulse Decline Indicates Near Term Trend Change

  • Euro Impulse Decline
  • Japanese Yen 120.97 Remains Key
  • British Pound Tests 2.0550
  • Swiss Franc Pattern Same as Euro
  • Canadian Dollar Rejected at 1.0400
  • Australian Dollar Ending Diagonal?
  • New Zealand Dollar Little Changed

[B]Commentary[/B]: Sometimes, looking at a very short term chart is helpful, especially when it is highly probable that the market is at a turning point. This is one of those times. It is obvious from the chart above that a 5 wave structure ended at 1.3832 and that there are 5 waves down from 1.3832 to 1.3773. 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.

[B]Strategy[/B]: Bearish on break of 1.3773, against 1.3832, target 1 at 1.3700, target 2 TBD

[B]Commentary[/B]: There is no change regarding the near term outlook for the USDJPY. “The USDJPY rally from 120.97 is in 5 waves, which strongly indicates that the entire decline from 124.13 was an a-b-c correction. The decline from 122.61 is corrective so far and ended near the 61.8% of 120.97-122.61 at 121.60. 120.97 must hold in order to keep the bullish structure intact. Ultimately, we are looking for a new high (above 124.13).”

[B]Strategy[/B]: Bullish now, against 120.97, target a break above 124.13, target TBD

[B]Commentary[/B]: The rally from 2.0261 is the 9th wave in the rally that began at 1.9621. As we have commented on here before, reversals occur following completions of 5 wave structures - or derivations of 5 wave structures - 9, 13, 17, etc. 9 waves means that one of waves 1, 3 or 5 is extended. For trading purposes, it does not matter which one is extended but rather that the probability is high that a reversal will occur. There is no sign yet of a reversal but we are on the lookout for one. The clear ‘5 down? in the EURUSD favors a turn in Cable. Daily RSI is at 81, which is the highest since December 2006 (GBPUSD reversed then at 1.9847). Coming under the trendline drawn off of the 7/10, 7/13, and 7/17 indicates additional bearish potential.
[B]Strategy[/B]: Flat

[B]Commentary[/B]: 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.
[B]Strategy[/B]: Bullish on break above 1.2026, against 1.1960, target TBD

[B]Commentary[/B]: After testing the 1.0400 level this morning, the USDCAD has rocketed higher. 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 rally through 1.0497 would instill confidence in a bullish outlook.

[B]Strategy[/B]: Bullish now, against 1.0400, target TBD

[B]Commentary[/B]: We wrote yesterday that “a measured objective for the end of the advance from .8162 is the 161.8% extension of .8162-.8476/.8332 at .8840. The Aussie appears headed to a new high (above .8762) as the rally from .8707-.8750 is a 5 wave affair. A bullish bias is warranted against .8707.” The AUDUSD hit .8784 this morning but the decline from there to .8743 is impulsive and warns of additional gains. An ending diagonal may be unfolding but the potential for a turn is high, so we are moving to flat (previously bullish).
[B]Strategy[/B]: Move to flat

[B]Commentary[/B]: No change in Kiwi: “It is possible that a 3rd wave is complete at .7940. However, the decline so far has been uninspiring and the larger trend remain up. If wave 3 is complete, then look for wave 4 to unfold soon and bottom close to .7714 before a new high in wave 5. Ultimately, a measured objective for the end of the rally from .7237 is the 161.8% extension of .7237-.7637/.7452 at .8099.”

[B]Strategy[/B]: Flat