Mixed Signals for Dollar as Major Pairs Diverge

• Euro Rejected at 1.3000
• Japanese Yen Pairs Gains
• British Pound Still Looks Bullish Short Term
• Swiss Franc 1.2376 Bearish Pivot
• Canadian Dollar going Nowhere Fast
• Australian Dollar Ending Diagonal
• New Zealand Dollar Possible Short Term Triangle

EURUSD – We are still looking for a low to be made below 1.2865, which would be followed by a rally that will retrace a portion of the decline from 1.3367. Measured objectives are centered near 1.2750. The 61.8% extension of 1.3367-1.2865 / 1.3066 is at 1.2756 and the level where wave 5 would equal wave 1 is at 1.2747. Only a rally above 1.3066 (Friday’s) high negates the near term bearish structure. Near term resistance is at the 61.8% of 1.3066-1.2912 at 1.3007. Remember that a decline below 1.2865 satisfies minimum expectations for a 5th wave down. The 200 day SMA is also potential support at 1.2824.

USDJPY – The USDJPY appears to be tracing out a 3 wave zigzag correction. The decline from 122.21 to 120.10 would be the first of that 3 wave correction (wave A) and the bounce to 121.38 would be the second wave (wave B). A third wave (wave C) decline could extend to 119.26, which is where waves A and C would be equal. 119.26 is also the 38.2% of 114.43-122.21. Price closed below the 20 day SMA yesterday, which favors bears. 121.38 is critical resistance to the bearish case and the measured objective at 119.26. Price is currently just below a short term resistance line (see chart below).

GBPUSD – We were looking for a C wave decline to 1.9316 but the impulsive rally from 1.9537 negated that interpretation. Instead, the rally from 1.9537 is taking on the look of a wave C that will challenge the 100% extension of 1.9482-1.9750 / 1.9537 at 1.9805. We maintain that the GBPUSD is nearing a major top. In fact, that top could be in place at 1.9915. The decline from 1.9915 could be the first of a 5 wave bearish sequence and this bounce, which would end near 1.9805 would be the 2nd wave. Near term support is at 1.9620.

USDCHF – Due to the fact that we can count 5 waves up from 1.1880, it is possible that a countertrend move is already underway. The 5 wave rally from 1.1880 is likely the first wave of a larger 5 wave sequence thus the correction that is beginning now will be the second wave. Second waves often retrace a large portion of the first wave, so we are looking for a decline to extend towards the 61.8% of 1.1880-1.2575 at 1.2146. This level is also just above a series of lows from December and January. A decline below 1.2376 will be the first sign that this decline is underway. Price is very close to 1.2376 and the short term head and shoulders pattern suggests that a break is imminent. If 1.2575 is broken, then the bullish wave from 1.2376 is still progress.

USDCAD – We have been calling for a major turn in the USDCAD to occur at or near the 1.618% extension of 1.0927-1.1456 / 1.1028 is at 1.1883. The pair reached 1.1873 on Friday and has turned down slightly. While there is no evidence that a turn has occurred yet, a break below the 1/25 low at 1.1731 would strongly suggests that a top is in place. Very short term resistance is yesterday’s high at 1.1846 but 1.1873 needs to hold for the immediate bearish case to remain favored.

AUDUSD – The short term structure in AUSDUSD is rather bearish. An a-b-c correction appears to have taken place from the 1/31 low at .7698. The c wave would be equal to the a wave at .7791, which also happens to be the 38.2% of .7941-.7698. Also, the c wave has unfolded as an ending diagonal, an inherently weak pattern that often gives way to a forceful decline. A decline below .7743 confirms the bearish bias.

NZDUSD – Kiwi has bounced from where the .7038 decline equals the .7099-.6841 decline. As such, we are left with just a 3 wave correction of equal legs from .7099. This structure is suggestive of a bottoming in NZDUSD (as long as .6769 holds). A rally above .6868 grants confidence to the bullish case. On the other hand, the pair may be forming a short term triangle. In this case, we would favor a terminal decline to below .6769. .6868 needs to hold as resistance for the triangle to remain intact. (See yesterday’s chart for the former scenario…the chart below is the triangle interpretation).