The Japanese Yen and Euro dip into bearish territory, supporting a move into positive territory. Meanwhile, higher yielders in Aussie and Kiwi remain improving according to our plot.
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[B]EURUSD [/B]
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[B]London[/B][B] Commentary: [/B][I]We wrote last week that “we see potential for a third of a third wave to unfold towards the 161.8% extension of 1.3370-1.3546/1.3450 at 1.3734.” The EURUSD is closing in on the 1.3730 target. Near term support is at 1.3627. The advance from 1.3360 has stalled near the 61.8% retracement from the top (1.3852) to 1.3360. A larger more complex correction may be playing out. In this instance, the rally from 1.3360 would end up as an a-b-c rally with the rally from 1.3450 unfolding as wave c (and in 5 waves). Even in this bearish alternate count, we expect a new high above 1.3684 before a reversal. The 78.6% at 1.3747 is a potential reversal point.[/I]
[B]New York[/B][B] Update: [/B] The euro continues to trade above our benchmark support of 1.3627 with momentum indicators favoring upside potential for the currency pair. However, at this point, a confirmed break above the short term descending trendline at 1.3684-1.3658 will be needed before a break higher lends scope for a test of the 1.3684 August 26th high. Downside risk is capped at the 1.3635 intraday session low.
[B]Strategy: [/B]Remain bullish, move risk to 1.3540 (from 1.3450), target hit at 1.3620, second target is at 1.3730
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[B]USDJPY [/B]
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[B]London[/B][B] [/B][B]Commentary: [/B][I]We wrote yesterday that “former support at 117.20 may now be resistance.” The high put in on Thursday at 117.12 remains intact but the decline since then is corrective, suggesting that one more high will be registered. 117.89 is a likely reversal point. This is the confluence of the 50% of 124.13-111.59 / 100% extension of 111.59-115.50/1113.98. We will be looking for a top and reversal near that point.[/I] [I] [/I]
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[B]New York[/B][B] Update: [/B]USDJPY continues to hover above the 116.00 round figure support as we head into afternoon trade. The lull in the markets will likely lead the currency pair higher to remain confined in the range that has persisted even before the weekend. As a result, we eye the short term resistance test at 116.74 August 26th high before an imment test at the aforementioned 117.20 resistance trendline.
[B]Strategy: [/B]Look for a top and reversal near 117.90
[B]GBPUSD [/B]
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[B]London[/B][B] [/B][B]Commentary:[/B] [I]We wrote last week that “given the ease with which Cable took out 2.0020, it is likely that we?ll see a test of 2.0203 (161.8% extension).” The pair has tested this level and Cable is in a potential reversal zone. There are a few different valid wave counts at the current juncture but the one that we favor labels the entire decline from 2.0654 as large wave A. The rally since is large wave B (although the rally from 1.9651 could just be the first leg of wave B). Resistance should be strong near current levels, which is 2.0153 and 2.0271 (50%-61.8% of 2.0654-2.0153). The mentioned 161.8% is also at 2.0203 (middle of the fibo zone) and this is a previous congestion area.[/I]
[B]New York[/B][B] Update: [/B]Trailing a bit downwards heading into the close, GBPUSD looks to have slightly more bullish potential, however limited, before a correction is in favor. With momentum indicators showing upside potential, a break of the 2.0150 resistance trendline will open scope for an imminent test of the 2.0190 resistance figure before topping out just below the 2.0200 ceiling in the short term.
[B]Strategy: [/B]Bullish targets hit (flat)
[B]USDCHF [/B]
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[B]London[/B][B] Commentary[/B]: [I]As continues to be the case, rallies have unfolded in 3 waves at varying degrees of trend, indicating to us that the larger trend is down. A break below 1.1990 instills confidence in the bearish case and gives scope to a test of the 8/6 low at 1.1815. The first bearish target is the 161.8% extension of 1.2215-1.1993/1.2111 at 1.1753.[/I]
[B]New York[/B][B] Update: [/B]We maintain our bearish stance as the underlying currency pair looks to once again test the 1.2000 psychological support level. Momentum indicators are ticking lower, confirming the notion with upside potential minimized to the 1.2046 August 27th high. Subsequently, a break lower of the support trendline would open scope for a move lower to our benchmark support of 1.1993 and lower.
[B]Strategy: [/B]Bearish now, add to position on break of 1.1993, risk at 1.2215, move risk to 1.2111 on a break of 1.1993, targets 1.1760 and TBD
[B]USDCAD [/B]
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[B]London[/B][B] [/B][B]Commentary:[/B] [I]We wrote last week to “look for a test of 1.0340 if 1.0531 gives way.” We continue to look lower as the USDCAD has dropped below 1.0500. The 100% extension of 1.0866-1.0530/1.0666 is at 1.0331, close to the 7/24 low of 1.0340. This is an intial bearish target. The bearish case is strong as long as price is below 1.0666. 1.0571 is near term resistance.[/I]
[B]New York[/B][B] Update:[/B] USDCAD is looking a little toppish in afternoon trading as the currency heads higher back towards 1.0550 resistance. Momentum indicators are overbought and will likely lead to definitive capping of the current bid higher. As a result, we remain bearish against the near term resistance of 1.0567 overnight high with a failure to break above opening up for a move towards the 1.0469 session low.
[B]Strategy: [/B]RemainBearish against 1.0666, target 1.0340
[B]AUDUSD [/B]
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[B]London[/B][B] [/B][B]Commentary: [/B][I]The AUDUSD looks similar to cable in that the decline from the top (.8870) is in 3 waves. This leaves open several possibilities but we favor labeling the decline from .8870-.7675 as wave A. The rally from .7675 is wave B (or just the first leg of wave B). We wrote last week that “strength may continue until the 100% extension of .7675-.8092/.7955 at .8374. The 61.8% of .8870-.7675 at .8413 defends this level as well.” The Aussie is may very well challenge this level in the next few days. We will be looking for a top and reversal near there.[/I]
[B]New York[/B][B] Update:[/B] The AUDUSD looks set for a move higher with plenty of support below at the 0.8300 psychological trendline. As a result, a penetration above the 0.8333 session high will shift targets upwards to the 0.8410, where considerable barriers will likely cap the bid move. Any downside potential seems to be capped by the 0.8280 near term floor.
[B]Strategy: [/B]Looking for a top and reversal near .8410
[B]NZDUSD [/B]
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[B]London[/B][B] [/B][B]Commentary[/B]: [I]Kiwi is in a similar situation (compare to the Aussie). Last week, we wrote that “there are a few valid waves counts at the current juncture but look for a test of the 100% extension of .6639-.7026/.6886 at .7273 before reversal potential.” The high in the NZDUSD today was at .7271, which is the 100% extension. A small 5 waves down would indicate bearish potential. For now, there is no evidence of a top.[/I]
[B]New York[/B][B] Update: [/B]A similar situation is forming in the NZDUSD currency pair as the price action is setting up for a tick higher in the next 24 hours. Momentum indicators are supportive of the notion, with a confirmed break above the 0.7272 session high putting initial targets at the 0.7284 resistance in play. Downside risk is minimized at 0.7171 support.
[B]Strategy[/B]: Flat