The GBPUSD sports a short term inverse head and shoulders pattern. The EURUSD made an inside day. Both developments are evidence of a short term reversal opportunity.
On Thursday’s Day Ahead, we wrote about the 4th wave triangle and discussed potential levels that could produce a bottom. We cited “1.4431 and 1.4673” and wrote that “1.4675 seems more likely given that this is the center of the November-February consolidation. 1.4668 is the 38.2% of 1.2482-1.6018. Look for a significant low near 1.4650/75.” The low on Friday was at 1.4656 and the EURUSD formed an inside day (candle pattern) today; which is suggestive of at least a pause in the trend. Very short term, a rally back to the center of the triangle near 1.49 is expected.
As long as price is above 108.36, we favor a rally to the 116.60/118 area. These are longer term measured objectives that we refer to often in the morning technicals (released around 9 am EST). Near term, look to the short term Fibo zone (109.23-77) for support.
We wrote Thursday regarding the GBPUSD that “wave 5 is considered underway from 1.8786…the GPBUSD objectives for the end of wave 5 are at 1.8532 and 1.8375. A significant low could form near one of these levels.” Friday’s low was at 1.8512. It is not confirmed that a low is in place, but a potential inverse head and shoulders pattern has formed. Look for support near the left shoulder low (1.8618). A rally through 1.87 (neckline) would confirm the head and shoulders and present a short term bullish opportunity against the right shoulder low.
The USCHF is consolidating near the top side of a channel. The presence of 1.10, channel resistance, and the possible completion of 5 waves from 1.0010 make the USDCHF prone to a corrective decline.
The drop that ended just below 1.0550 was probably a 4th wave correction. As such, expectations are for a new high (above 1.0726) to complete the advance from .9974. Longer term objectives are at 1.08. Look for a top and reversal near there.
The 4th wave that was expected appears to be complete at .8795. Expect a new low, below .8591, before a more significant low forms. The psychological .85 level is potential support. It is also possible that a triangle is forming as wave 4. If this is the case, then the 4th wave price extreme is already in place at .8795 but the AUDUSD range would tighten before a terminal thrust lower completes the decline.
The NZDUSD rally stopped just shy of where the two legs would be equal (.7178). 3 wave movements are corrective so it is possible that the advance is complete at .7159 and that the NZDUSD is headed to a new low. With this in mind, a cautious bearish bias is warranted against .7159.
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