FX Technical Weekly

The dollar decline is extended. Wave structure at multiple degrees of trend favor in multiple pairs favor a turn towards USD strength. New highs in the EURUSD, AUDUSD, and NZDUSD are divergent with daily RSI. The USDJPY trend remains down below 96.71. The only open trade is the EURCAD long (triggered this week).


                                                                        [B]Elliott Wave Outlook:[/B] The EURUSD rally is stretched and due for at least a pullback and maybe a reversal.  Wave structure favors a reversal sooner rather than later.  The form of the declines from 1.6000 and 1.4723 and their subsequent rallies are the same.  The rally from 1.2886 is in 5 waves and wave 5 has hit and slightly exceeded the 1-3 line.  Until there is evidence of one, going short is too risky.                                                                 


                                                                        [B]Elliott Wave Outlook: [/B]There is no change to the bigger picture pattern in which wave 4 within the 5 wave decline from the 2007 high is nearing completion.  Cable has tested a former 4th wave extreme at 1.5730... and exceeded it.  The pair has touched the top of a parallel channel, which is a possible reversal point.  The rally from 1.3500 is taking the structure of a complex (w-x-y) correction.                                                                                     


                                                                        [B]Elliott Wave Outlook: [/B]Despite the new high in the AUDUSD, nothing has changed regarding the long term bearish implications (5 wave decline from 2008 high indicates additional bearish potential and the corrective rally from .6000 confirms as much).  Near term, RSI divergence along with a mature wave structure at multiple degrees of trend (3 waves up from .6000, 5 waves up from .6245 and 5 waves up from .6950) suggests that a turn is imminent.                                                                                    


                                                                        [B]Elliott Wave Outlook: [/B]The NZDUSD has soared to a new high.  The rally from .5484 is in 5 waves therefore the risk of at least a pullback, potentially to .5829, is high.  The advance from below .5000 is most likely an A-B-C (zigzag) and wave C would equal wave A at .6581.                                                                                


                                                                        [B]Elliott Wave Outlook: [/B]The USDJPY is approaching 93.50…a break below there would completely clear the head and shoulders top that has formed since March.  The triangle count that I have presented in recent days is still valid but becoming less probable by the day.  At this point, remaining below 96.71 keeps the near term trend pointed down.                                                                                


                                                                        [B]Elliott Wave Outlook: [/B]RSI divergence at the low along with potential support from a line extended from the 4/16 and 5/8 lows indicates reversal potential.  Structurally, the decline from 1.3068 is in 7 waves.  This decline could be counted in several ways, but the near term implications are bullish for nearly all counts.  The decline could an A-B-C correction that is nearing completion, a double 3 (two flats), or waves 1 through 3 of an impulse.  At least a rally back to 1.1820 is expected.                                                                                


                                                                        [B]Elliott Wave Outlook: [/B]The USDCHF has dropped below its March low of 1.1157.  In other words, minimum expectations have been met for wave Y.  Look for a low.                                                                                


                                                                        [B]Elliott Wave Outlook: [/B]5 waves down from 137.46 is bearish and suggests that the long term trend is down.  However, the decline could be wave C of an expanded flat or part of a triangle.  Intraday momentum studies are overbought, which suggests at least a pullback is due.  The downside is favored as long as price is below the origin of the 5 wave decline (137.46).                                                                                


                                                                        [B]Elliott Wave Outlook: [/B]It is possible that a triangle is unfolding.  This would define the near term trend as bullish in wave D of the triangle up towards .9200.  A drop below .8634 would warrant a bearish breakout strategy against .9085.                                                                                


                                                                        [B]Elliott Wave Outlook: [/B]The rally from 1.5460 is an impulse (5 waves) so a bullish bias is warranted against that level.                                                                                


*Entry prices for trades that are recommended ‘at market’ are listed as the close price on the date published.