Swiss Franc Hammer at Key Support Hints at Future Dollar Strength

• Euro Ready to Tumble
• Japanese Yen Supported by Fibo (USDJPY Resistance)
• British Pound Decline Still Corrective
• Swiss Franc Hammer on Daily
• Canadian Dollar Ending Diagonal
• Australian Dollar .8280 Channel Support – Watch For a Break
• New Zealand Dollar .7350 Channel Support – Watch For a Break

EURUSD – There is no change in the call for a longer term top due to the 7 wave rally (which is a double zigzag?.two zigzags connected with an X wave – labeled W-X-Y) from 1.1638, extreme sentiment readings, and overbought RSI on the daily. Still, a break of 1.3666 would expose 1.3799, which is where wave W (1.1638-1.2979) would equal wave Y (beginning at 1.2458). The rally from 1.3524 is choppy and may be an ending diagonal. If an ending diagonal is in the works, then 1.3637 could be exceeded once more in a 5th wave. Coming under 1.3560 signals a reversal.

USDJPY – We remain bearish due to price crossing below the 20 day SMA, the resisting line from the 2/12 and 2/22 highs, the 61.8% of 122.17-115.14 at 119.48, the appearance of a head and shoulders reversal pattern, and most importantly, the longer term wave structure. The longer term wave structure strongly suggests that wave C (or 3) from a bearish sequence that began at 122.17 is underway and will eventually come under 115.14. However, yesterday’s hammer off of the 200 day SMA warns of a try on the 61.8% fibo of 119.84-117.60 at 118.98. Coming under 118.23 is the first sign of a turn lower.

GBPUSD – The doji made on 4/18 along with overbought and divergent RSI on the daily gives scope to a reversal. Still, the decline from the top is corrective, which leaves GBPUSD open to another high. Coming under 1.9984 indicates that a deeper correction is taking place. A measured objective for would be at 1.9921/24, which is the confluence of the 38.2% of 1.9589-2.0131 / 100% of 2.0131-1.9984 / 2.0068. See yesterday’s report for bullish measured objectives.

USDCHF – Yesterday’s hammer at critical support keeps focus on the bullish reversal scenario. In fact, there are 5 small waves up from yesterday’s low at 1.2000 (an important psychological figure). Support resides at 1.2037. The longer term turn wave structure supports a reversal (higher) as well. A rally above 1.2281 would give credence to this view and suggest that an important low is in place.

USDCAD – The USDCAD decline is overextended and the nature of the decline from 1.1394 suggests that a bottom is close at hand. The decline from 1.1394 is a 5th wave and takes the form of an ending diagonal (overlapping waves). This latest spike lower is likely the thrust that is so common with these patterns. A return to the 1.1394 level in a correction is likely before another leg lower eventually challenges 1.0927.

AUDUSD – Recent commentary stated that “daily oscillators (CCI and RSI) are overbought and divergent with recent highs. Also, the break that occurred at .8000 was from a triangle and triangle breakouts are terminal (meaning that they are eventually retraced). The daily chart below shows the triangle (a-b-c-d-e) and the 5 wave rally that has ensued and RSI. With daily oscillator action, an extreme risk reversal rate (1 month 25 delta options) and the Aussie at former longer term resistance, we are looking for a reversal.” A 5 wave decline from .8390 sets the stage for more downside action and we are bearish against the high (.8390) on a break of trendline support near .8280.

NZDUSD – We showed the 5 wave decline from .7491 yesterday to suggest that another leg lower would occur. That leg lower took Kiwi to .7362 last night but this results in just a 3 wave decline from the high (.7491). This leaves the door open to another high, therefore we urge caution with regards to getting bearish before a break of the trendline (shown below).