A US dollar breakdown is underway. The buck has traded at 2009 lows against the AUD, NZD, and CAD in recent days and the EUR, GBP, and CHF should follow suit. The next EURUSD bull leg will likely see a test of the December 2008 high of 1.4720.
[B]EURO / US DOLLAR[/B]
[B]Classical Outlook:[/B] Price action remains extremely choppy with the market whipsawing between 1.4000 and 1.4340 in recent trade. However, at this point it appears as though bulls are winning out, with any pullbacks easily met by intense buying. A closer look at the weekly suggests that we are on the verge of another major upside break following consolidation since May, which if broken, would project gains towards 1.5000. Look for a break above 1.4340 and close above the 100-Week SMA to confirm. [B]Elliott Wave Outlook: [/B]Last week, I wrote that “a 4th wave triangle is complete at1.3877 and the next expected move is a terminal thrust (higher) above 1.4340 and maybe 1.4720.” Today’s strong rally inspires confidence in a break next week. Again, expectations are for the rally to end above 1.4720.
[B]
BRITISH POUND / US DOLLAR[/B]
[B]Classical Outlook:[/B] Friday’s price action alone has negated the hopes for a major head & shoulders top formation on the daily chart with the weekly price action now looking more like a bullish consolidation that is on the verge of some fresh upside. A sustained break above 1.6745 should open the door for a push back above 1.7000 over the coming days. Back under 1.6340 now required to shift structure. [B]Elliott Wave Outlook:[/B] A triangle is also complete in the GBPUSD. Price should stay above 1.6470 on its way to at least 1.7000. Keep in mind that the rally will complete the entire advance from the January low as thrusts from triangles are considered terminal.
[B]
AUSTRALIAN DOLLAR / US DOLLAR[/B]
[B]Fresh 2009 highs beyond 0.8265 with the market ending the latest multi-week consolidation and now attempting to push towards critical psychological barriers by 0.8500. Any hopes from USD bulls for a top can only now be achieved with an immediate failure above 0.8300 and break back below 0.8125 which now offers itself as formidable support. The market is set to close above the 100-Week SMA for the first time since August 2008. [/B] [B]Elliott Wave Outlook:[/B] Bigger picture, the AUDUSD is at risk of a significant decline as the structure of the rally from .6005 is corrective (3 waves). But, the larger decline will not begin until wave v of C is complete . .8385 (61.8% of the decline from .9856) is potential resistance. Expect a test of .85.
[B]
NEW ZEALAND DOLLAR / US DOLLAR[/B]
[B]Classical Outlook:[/B] Has just managed to squeak out a fresh 2009 high by 0.6640, with the market successfully putting in yet another weekly higher low and higher high. The key level to watch above comes in by the 200-Week SMA at 0.6730, but we would also expect this level to provide a solid cap on additional gains. It is worth noting that the market has recently failed directly by critical former support from August 2007 at 0.6640 which could be warning of a near-term top. [B]Elliott Wave Outlook:[/B] The NZDUSD is in a similar position. Expect additional strength over the next several weeks to complete the rally from below .50. .6950 (pivot high from September 2008) is potential resistance.
[B]
US DOLLAR / JAPANESE YEN[/B]
[B]Classical Outlook:[/B] There is nothing bullish in the medium-term or longer-term for this pair with the market locked in an inter-day downtrend off of the 2009 highs by 101.45 and in a much more defined longer-term down-trend since 2007. We look for a fresh lower top now by 101.45 to be confirmed on an eventual break back below 87.15 over the coming weeks. Any rallies above 95.00 should therefore be used as good sell opportunities. Also look for a break back under 91.75 in the coming week to accelerate declines. Gains also continue to stall by the weekly Ichimoku cloud bottom. [B]Elliott Wave Outlook:[/B] The decline from 101.50 is a series of 1st and 2nd waves. The USDJPY is resisted by the 200 day SMA (although the pair did trade above there briefly in the middle of this week). Bears are favored against 97.01 in anticipation of the long term decline continuing below 87.10 and eventually to an all-time low (below 80).
[B]
US DOLLAR / CANADIAN DOLLAR[/B]
[B]Classical Outlook: [/B]Despite the latest pullback, we still hold a constructive outlook for the pair and look for a low to carve out at current levels ahead of renewed strength back above 1.1725 over the coming weeks. Daily studies are now oversold, while medium-term studies show the market very well supported below 1.1000. It is too early to call for a major double bottom, but a base at current levels and break back above 1.0935 would help to strengthen case. [B]Elliott Wave Outlook:[/B] The entire rally from 1.0782 has been retraced. Additional weakness is expected in order to complete the decline from 1.1730 and by extension the entire decline from 1.3068. 1.0588 is the next level of potential support (Fibonacci).
[B]
US DOLLAR / SWISS FRANC[/B]
[B]Classical Outlook:[/B] The market has mounted a slow and steady recovery since posting historic lows below parity in 2008, but is under pressure over the past several weeks with the latest consolidation underway just over 1.0500. But for the recovery structure to remain intact, the market needs to hold above the December 2008 1.0410 lows. A 2009 low was recently made by 1.0590 and we look for the latest consolidation to hold above this level ahead of a fresh upside break beyond 1.1025 which offers itself as medium-term resistance. Below 1.0590 concerns. [B]Elliott Wave Outlook:[/B] Sticking with the USD bearish count, expectations over the next several weeks are for a thrust lower that ends below 1.0367. Bears are favored against 1.0939 and 1.0037 is a potential target (100% extension of 1.2303-1.0367).
[B]
EURO / JAPANESE YEN[/B]
[B]Classical Outlook:[/B] No clear bias here as the market continues to chop around. A break back above 140.00 or below 127.00 is now required for clearer directional bias. Above 140.00 suggests major base in place, while back below 127.00 opens the door for bearish continuation. [B]Elliott Wave Outlook:[/B] Lack of clarity is the best way to describe the EURJPY. Ideally, the rally from the January low in the EURJPY completes wave C of an expanded flat that began at the October 2008 low. The implications are bearish but this count doesn’t make sense with the EURUSD bullish count (unless the USDJPY falls that much more than the EURUSD gains…which is possible). For now, those trading the EURJPY would do best to play the 127-137 range but watch for potential support at 130.50 (Fibonacci).
[B]
BRITISH POUND / JAPANESE YEN[/B]
[B]Classical Outlook:[/B] Very tough to call with compelling cases on both sides here. Bulls make a case for continued recovery from the historic lows set in early 2009, with a higher low now by 146.80 ahead of the next upside beyond 162.60. Bears can argue that we have broken the rising channel support off of the 2009 lows, with the latest rally expected to stall ahead of 162.60 and set up 1-2-3 top formation. We are sidelined. [B]Elliott Wave Outlook:[/B] Very tough to call with compelling cases on both sides here. Bulls make a case for continued recovery from the historic lows set in early 2009, with a higher low now by 146.80 ahead of the next upside beyond 162.60. Bears can argue that we have broken the rising channel support off of the 2009 lows, with the latest rally expected to stall ahead of 162.60 and set up 1-2-3 top formation. We are sidelined.
[B]
EURO / BRITISH POUND[/B]
[B]Classical Outlook:[/B] Weekly studies still show plenty of room to run and we look for additional setbacks towards the 0.8200 area. As per our commentary in the previous week, a lower top appears to be carving out by 0.8700, with the market putting in a very impressive bearish reversal week. [B]Elliott Wave Outlook: [/B]The EURGBP appears to have completed a correction from the December 2008 top. The structure of the decline since then is not especially clear, which is the first sign that the pair in question is stuck in some sort of correction. However, the rally off of the low is choppy as well. Price is in the middle of a multi-week range right now so near term direction is unclear. Above .87 exposes .8870 and below .84 exposes .8230.
[B]
TRADE LIST[/B]
*Entry prices for trades that are recommended ‘at market’ are listed as the close price on the date published.