- Euro Short Term c Wave Lower?
- Japanese Yen May Be Entering 3rd Wave
- British Pound Count Remains Bullish
- Swiss Franc At Support (USDCHF Resistance)
- Canadian Dollar Inverse Head and Shoulders
- Australian Dollar Continues to Make Highs
- New Zealand Dollar Potential Resistance Line
Commentary: The high made on 7/18 at 1.3832 remains intact. As we focused on yesterday, the 3 wave rally from 1.3752-1.3830 suggests that 1.3752 will be broken. The decline unfoidng from 1.3830 is most likely either a wave 3 or a c wave. A short term bearish target is the 161.8% extension of 1.3832-1.3752/1.3830 at 1.3700. This is also a former 4th wave/congestion area from 7/10. The bearish alternate has a triangle unfolding from 1.3832. 1.3832 is key to the short term bearish case.
Strategy: Remain bearish, against 1.3832, target 1 at 1.3700, target 2 TBD
Commentary: The dominant pattern in the USDJPY remains the 3 wave decline from 124.13 to 120.97, which is why we have remained with the bullish count. As long as 120.97 remains intact, the structure in the USDJPY is bullish. Shorter term, the rally from 120.97 is an impulse and therefore likely wave 1 (or a) in a new 5 wave bullish sequence. A push above 122.61 gives scope to a test of 123.18, which is the 100% extension of 120.97-122.61/121.55. Longs should keep risk tight at this level but we expect a rally through 124.13 in the next few weeks.
Strategy: Bullish now, against 120.97, target a break above 124.13, target TBD
Commentary: Cable has backed off following the spike through the resistance line drawn off of the 6/12 and 7/3 highs. The short term pattern that we favor remains similar to that of the EURUSD. We are treating the spike this morning to 2.0541 as the top of wave b (or ii). Therefore, we are looking for a decline in wave c (or iii) to just below 2.0459. This indicates a very short term bearish opportunity, but the trend remains bullish above 2.0365 (as the count shown today indicates). A new high (above 2.0547) would be wave iv within the rally from 2.0056 (which is larger wave 3) and give way to a larger correction. A break of 2.0364 indicates additional bearish potential (and potentially a significant reversal).
Commentary: We wrote yesterday that “we maintain that the USDCHF is forming a low. Similar to the EURUSD (but the inverse), the USDCHF rally from 1.1960 is an impulse (5 waves), indicating that the near term trend has turned to the upside. Initial resistance is at 1.2068 (trendline resistance is at 1.2090 as well) but the 5 up? from 1.2960 indicates additional bullish potential.” The pair hit 1.2064 this morning. Since the rally from the low is in 3 waves and at the cited resistance, we recommend that longs keep risk to 1.1982. Risk of a decline is high.
Strategy: Move to flat (previously bullish)
Commentary: The USDCAD is little changed. “We have been looking for a bottom due to speculative positioning and the longer term wave structure, which has an ending diagonal unfolding from 1.4000. The rally from 1.0400 is impulsive, indicating that the trend has turned. A bullish bias is warranted against 1.0400. An inverse head and shoulders pattern may be playing out in the short term as well. A rally through 1.0477 increases confidence in the bullish outlook.” The decline from 1.0477 is in 3 waves and the 3rd leg of that decline is also in 3 waves, which bolsters the bullish bias.
Strategy: Bullish now, against 1.0400, target TBD
Commentary: We wrote yesterday “that an ending diagonal may be unfolding and that the potential for a turn is high”. The Aussie spiked to .8811 this morning and has backed off to below .8800 since. Risk is for a retrun to .8707, which was the origin of the diagonal. The larger 4th wave that are looking for may be beginning. This outlook has a correction unfolding for the next seversal weeks.
Commentary: We are looking for a decline in a 4th wave towards the 7/11 low at .7714. Potential channel support is at .7770 today. Coming under .7882 indicates additional that wave 4 is underway. The confluence of psychological resistance (.8000) and the resistance line drawn off of the June and July highs should provide formidable resistance. The larger trend remains towards higher prices (as indicated on the chart) but we are looking for a pullback first.
*JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTRENDLT is the longer term trend and uses the last 4 weeks of price data. JTRENDST is the shorter term trend and uses the last 5 days of price data. An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.