The major currencies have improved according to our plot as the Euro, Pound, and Japanese Yen have shifted into a more bullish trend. However, USDCAD has fallen back to the longer term bearish trend, at least for the moment, with dollar strength limited ahead of the holiday.
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[B]EURUSD [/B]
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[B]London[/B][B] Commentary: [/B][I]Potential remains for a push to the 1.3750 area before a reversal back towards at least 1.3463. The rally from 1.3360 may be an initial 5 wave advance within a larger rally sequence but even if that is the case, a correction would be expected to play out to at least 1.3563 (former 4th wave). The structure of the decline from 1.3718 will give us a better idea of the larger trend. A break of the short term supporting trendline would warrant a bearish bias.[/I]
[B]New York[/B][B] Update: [/B]Aside from the interim spike in the New York morning, the EURUSD price action hasn?t changed much. Finding resistance at the 1.3675 trendline, the currency has now fallen back to test support just 50 basis points lower at 1.3625. This looks like a good level as the currency is consolidating, setting for another leg higher per momentum indicators. As a result, without a formidable close below the aforementioned level, initial targets above at the 1.3654 are set to be in play with scope for a move back to test the 1.3679 August 29th spike high.
[B]Strategy: [/B]Flat
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[B]USDJPY [/B]
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[B]London[/B][B] [/B][B]Commentary:[I] [/I][/B][I]Bigger picture, the USDJPY has traced out 5 waves lower (which is large wave 1)from 124.13 to 111.59, indicating a large degree trend change. Since the low at 111.59, it is our contention that an A-B-C correction is unfolding as large wave 2. Within this A-B-C, wave C might be underway from 113.86. We wrote yesterday that “a break above 116.24 warrants a bullish stance against 115.22, targeting 119.34 (61.8% of 124.13-111.59) for the completion of wave C (wave 2). The best opportunity will be to the downside for wave 3 lower. This most likely will not present itself until next week.” The pair did break above 116.24 so favor the upside until 119.34 (we will look for a top and reversal near there next week).[/I]
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[B]New York[/B][B] Update: [/B]Looking bullish, the USDJPY short term picture is one of strengthened support. Consolidating at the 115.84 support trendline, prospects are looking for a push higher, setting barriers at the 116.60 intraday spike high into play as oscillators confirm the notion. Any downside at this point would be limited to the 115.48 intraday low.
[B]Strategy: [/B]Flat (waiting for wave 3 bearish opportunity)
[B]GBPUSD [/B]
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[B]London[/B][B] [/B][B]Commentary:[/B] [I]The structure of Cable is virtually the same as the EURUSD. That is, in the intermediate term, we expect both pairs to turn lower and head much lower. However, just as the EURUSD seems poised to test 1.3750, the GBPUSD appears that it will continue towards the 61.8% of 2.0654-1.9651 at 2.0271 before reversing to at least 1.9961. We can not ignore the fact that setbacks since 8/17 have occurred in 3 waves. 3 means indicates countertrend movements, therefore the near term trend is pointed higher. In summary, look for a top and reversal near the 61.8% of 2.0654-1.9651 at 2.0271 with the initial bearish objective at 1.9961. [/I]
[B]New York[/B][B] Update: [/B]Continually bullish, the pound sterling looks set to move higher off of the 2.0150 support trendline. As a result, ahead of the weekend, we are looking for a formidable break above the 2.0190 August 26th high in attempting tests at the 2.0232 intraday spike high target and above.
[B]Strategy: [/B]Remain bullish, move risk to 2.0043, (from 1.9961), target 2.0271 and 2.0439 (move to BE after T1 hit)
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[B]USDCHF [/B]
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[B]London[/B][B] Commentary[/B]: [I]With price action remaining choppy on a short term basis, we are showing the daily chart today for perspective. [B]The daily chart shows a clear 5 wave rally from the December 2004 low to the November 2005 high. Everything since has been a correction. However, the correction is not complete. A complex correction has unfolded from the November 2005 high (W-X-Y). Wave X is a triangle, which means that we should expect a terminal thrust lower to complete the correction. The thrust to 1.1815 is most likely just the first leg of wave Y lower. As such, we are looking for price to come under 1.1815 before any meaningful bottom is in place. [/B][/I][B][/B]
[B]New York[/B][B] Update: [/B]The USDCHF currency pair is slowing approaching key resistance in the 1.2088 August 20th spike high. Momentum indicators are supportive of near term downturn in the pair, setting barriers at the 1.2054 and 1.2048 into play. Further breaches below would see definitve capping at the 1.1992 Aug 24th spike low. Any comparative upside would be minimal up to 1.2110.
[B]Strategy: [/B]Flat (best idea here is to sell breaks lower?.first bearish pivot at 1.1960)
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[B]USDCAD [/B]
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[B]London[/B][B] [/B][B]Commentary:[/B] [I]Near term USDCAD price action is choppy and corrective as well, which makes trading this pair on a short term basis risky right now. When price action is choppy, we prefer to sit tight and wait for a clearer pattern to emerge. The longer term charts (we are showing the weekly today) indicate that a significant bottom may be in place at 1.0340. A rally above 1.0676 most likely leads to a break above 1.0866. Short term, there is a possible head and shoulders continuation pattern, which is bearish. This pattern would suggest a retest of 1.0340 is in order before a reversal occurs.[/I]
[B]New York[/B][B] Update: [/B]Dollar momentum looks to continue against the Canadian dollar in the near term, off of strong support at 1.0539. Backed by oscillators to the upside, bidders are likely to run into tests at the 1.0592 intraday high before opening up scope to the 1.0650 resistance trendline. As always, bias is towards a formidable close above the intraday high before any long initiations are attempted. Downside barriers are coming in strong at the 1.0523 support.
[B]Strategy: [/B]Flat
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[B]AUDUSD [/B]
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[B]London[/B][B] [/B][B]Commentary: [/B][I]The AUDUSD is correcting the .8870-.7673 decline. The 3 wave movements at varrying degrees of trend make this clear. There are a number of possibilities right now, too many to take a strong stand one way or the other. Price could come under .8051 to test the 61.8% of .7673-.8333 in a b wave before proceeding higher in wave c to complete the correction from .7673?.or a b wave bottom may already be in place and price could continue higher from above .8051 to complete the c wave. A rally through .8234 favors the latter scenario and a drop under .8051 favors the former. [/I]
[B]New York[/B][B] Update:[/B] Prospects are bullish for the AUDUSD as the currency has already bounced off of formidable support at the 0.8137 trendline. Momentum indicators are supportive of a leg higher with a break above the 0.8180 near term resistance lending scope for a test at the 0.8239 ceiling. Any downturns are limited to the aforementioned support of 0.8137.
[B]Strategy: [/B]Flat
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[B]NZDUSD [/B]
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[B]London[/B][B] [/B][B]Commentary[/B]: [I]Naturally, the Kiwi is in the exact same position as the AUDUSD. Since the NZDUSD already tested the 61.8% of .6639-.7272 at .6881, it seems more likely that a B wave low is already in place at .6869 and that price is headed higher in wave C to test .7500 before a reversal. .7501 is the 100% extension of .6639-.7272/.6869 and .7547 is the 61.8% retracement of .8082-.6639. [/I]
[B]New York[/B][B] Update: [/B]Once again a similar situation is brewing in the NZDUSD currency pair. With momentum indicators ticking higher, heavy support is coming in at 0.6992 with scope for a push higher to test the 0.7099 intraday high. Any intraday break downs lower would see formidable capping at the 0.6964 Aug 29th hourly low.
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[B]Strategy[/B]: Remain bullish, against .6869, target .7500
[B]Written by: Richard Lee, Currency Strategist[/B]