The EURUSD is consolidating ahead of the important December 2008 high. A burst through there should complete the entire rally from the October 2008 low. The USDJPY decline has accelerated and the ultimate objective remains beneath the all-time low. Rallies should be sold.
[B][U] EURO / US DOLLAR[/U][/B]
[B]Classical Outlook: [/B]We are entering optimal levels to start to look to build longer-term and more meaningful short positions. Daily studies are looking to cross above 70 on the RSI and the market should be well capped by resistance in the 1.4600-1.4720 area. Look for any rallies above 1.4700 to be unsustainable with the greater likelihood for a minimum pullback into the 1.4300’s. While the 50-Day SMA is a ways a way at this point, this will be the key medium-term level to watch below. A break will shift the structure. [B]Elliot Wave Outlook:[/B] The EURUSD is threatening the December 2008 high but even a push above there is probably short lived as the advance is probably wave C of a correction from the October 2008 low. Levels to watch for a reversal include 1.4870 and 1.5150 (1.50 as well given the round number importance). Below 1.4410 would begin to suggest reversal and underneath 1.4191 turns the tide.
[B] [U]BRITISH POUND / US DOLLAR[/U][/B]
[B]Classical Outlook: [/B]We continue to maintain a sell on rallies approach to this market with the view that the pair has made a meaningful high above 1.7000 this year. The ensuing price action is more choppy consolidation than any threat of a fresh upside extension beyond 1.7000. Arguably, the market could even be in the process of carving the right shoulder of a head & shoulders top that would project setbacks to 1.5000. Above 1.7000 negates. [B]Elliot Wave Outlook:[/B] Little to add other than the rally from the January low does count as a 3 wave rally (corrective) and the advance reversed at the 50% retracement of the decline from 2.04. Weakness from here would hint that a head and shoulders top is indeed underway. Watch intraday structure for bearish evidence (such as a 5 wave decline and subsequent setback).
[B] AUSTRALIAN DOLLAR / US DOLLAR[/B]
[B]Classical Outlook: [/B]Any hopes for some form of a top by 0.8500 were negated this week, with the market racing higher to set fresh 2009 highs beyond 0.8600. While the inter-day structure remains bullish, we contend the pair is overvalued at current levels and could be subject to a major corrective pullback over the coming weeks. Look for a break back below 0.8500 to confirm. [B]Elliot Wave Outlook:[/B] The AUDUSD C wave from .6245 is extremely extended. Divergence with daily momentum studies warn of a reversal (like the EURUSD). Watch the line extended from the tops of wave A and June for resistance as well as .8781 and .9032).
[B] NEW ZEALAND DOLLAR / US DOLLAR[/B]
[B]Classical Outlook: [/B]The break above 0.7000 this week to fresh yearly highs has forced a break above 70 in the daily RSI and now suggests that any additional gains from here could be limited in favor of a more sizeable corrective pullback. The 0.7000 figure has historically offered itself as formidable resistance and we look for the level to once again cap gains over the near-term. Look for a break back below 0.6900 to confirm bias. [B]Elliot Wave Outlook:[/B] A complex w-x-y (a-b-c-x-a-b-c) advance is nearing completion. .7250-.7507 is a potential reversal zone.
[B] US DOLLAR / JAPANESE YEN[/B]
[B]Classical Outlook: [/B]While the overall structure remains intensely bearish, the recent break below 91.75 leaves daily studies oversold and in need of a healthy corrective bounce. Recommend looking to take advantage of current dips in favor of some decent upside over the coming days/weeks. Inability to bounce however will expose direct retest of critical 87.15. [B]Elliot Wave Outlook:[/B] The 12 year triangle formation I what has kept me bearish for years. The break from the triangle in 2007 confirmed the pattern as a 4th wave consolidation in what is a nearly 40 year 5 wave decline. The decline is accelerating and a drop below 87.10 would put the all-time low in serious jeopardy (which is expected). Former support at 91.73 is now resistance as is 92.63. Price should stay below 97.81on its way to an all time low.
[B] US DOLLAR / CANADIAN DOLLAR[/B]
[B]Classical Outlook: [/B]Price action has been extremely choppy and the recovery that we had anticipated out from the 1.0600’s has not gone as smoothly as we had hoped. Nevertheless, our core bias is constructive and we continue to look for the formation of a medium-term higher low by 1.0600 and above the 2007 historic 0.9055 lows, ahead of fresh upside into the 1.2000’s. [B]Elliot Wave Outlook:[/B] Resistance has held in the USDCAD and the pair is threatening its early August low. Barring a break above the resistance line, weakness is favored until 1.0330 - which has been both support and resistance over the last several years. This level is also the 61.8% of .9055-1.3068. Potential resistance is at 1.0890 and 1.0940.
[B] US DOLLAR / SWISS FRANC[/B]
[B]Classical Outlook: [/B]The multi-week prominent range trade has now been broken to the downside with the market taking out psychological barriers at 1.0500 and descending to fresh 2009 lows into the 1.0300’s thus far. However, with daily studies now oversold, any additional declines are seen limited, in favor of a sizeable corrective bounce back towards the 1.0700-10900 area over the coming weeks. [B]Elliot Wave Outlook:[/B] The USDCHF pattern is more mature than the EURUSD, having already printed on the other side of its December 2008 extreme. Barring a move through channel resistance, a potential point of reversal is 1.0037.
[B] EURO / JAPANESE YEN[/B]
[B]Classical Outlook: [/B]Confined to the middle of a multi-week range, with the market most recently failing by the range highs ahead of 140.00 and rolling back over. Our bias is mildly bearish over the coming weeks and we look for a drop back into the lower range by 125.00-127.00 [B]Elliot Wave Outlook:[/B] A large triangle appears to be in its latter stages. Typically a continuation pattern, triangles usually precede the final leg of a move. In this case, the trend is up (albeit in a correction). The triangle fits as either a B or X wave. A terminal thrust to a new 2009 high is possible as long as the EURJPY stays above 127.00. Under there would confirm a double top and open the door up for a move below 120.
[B] BRITISH POUND / JAPANESE YEN[/B]
[B]Classical Outlook: [/B]Could be looking set for a major bearish continuation after stalling out by fresh 2009 highs at 163.10. The latest pullback now brings a potential double top formation into the picture which could open an initial move towards neckline support at 146.80. Below 146.80 triggers the double top and exposes the 138.00 area. Above 163.05 negates. [B]Elliot Wave Outlook:[/B] The GBPJPY is in a similar situation. Testing the bottom of its summer range - a drop below 146.74 would confirm a double top. In such an instance, the measured objective is near 130. Until 146.74 gives, there is potential for a move up into a congestion zone of 153.50-157.50.
[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 0.8000 area over the medium-term. For now, a period of consolidation appears to have set in, with the latest rallies into the 0.8700-0.8800’s to be used as good sell opportunities in anticipation of an eventual bearish continuation. [B]Elliot Wave Outlook:[/B] The decline from .9807 is a 3 wave affair which found support at the 61.8% retracement of the prior bull move. This has me thinking that the larger trend remains up. A solid base formed and a move through the trendline exposes .9085. Look to buy pullbacks below the trendline. Former resistance levels .8650 and .8600 are good areas to pick.
[B][B]Trade List[/B][/B]
*Entry prices for trades that are recommended ‘at market’ are listed as the close price on the date published.