A break below 1.5670 is required in order for us to turn bearish the EURUSD. If that happens, then a much larger decline is likely underway (towards mid 1.40s).
The exceptionally strong rally since June 2007 is a 3rd of a III wave rally but may be over. Wave 4 of III may be likely underway now as either a flat or triangle. In the case of a flat, the decline could test the 38.2% of 1.3260-1.5903 at 1.4894 or the 50% at 1.4582. A rally through 1.5906 would suggest that the EURUSD remains in a topping process, maybe as an ending diagonal from 1.5342.
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Short term intraday charts show that the decline from 1.5916 can be counted as an impulse (with an expanded flat that has followed). Given the possibility that the entire advance from 1.5342 is a B wave (a-b-c) in a flat from 1.5904, a bearish bias is warranted on a break below 1.5670. The bearish target is not until below 1.5342. 1.5916 must remain intact for this bearish scenario to remain favored. We’ll watch the short term price action closely and present a bullish alternate tomorrow if necessary.
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STRATEGY: Bearish on a break below 1.5670, against 1.5916, target below 1.5342
Longer term, we maintain that a 12 year triangle ended at 124.13 in June 2007 and that the USDJPY is headed lower for a test of its 1995 low at 81.12. The rally from 95.72 is viewed as wave iv within the 5 wave decline from 117.93 (which is wave 3 within the 5 wave decline from 124.13) and may be complete at 102.95 (38.2% of 114.65-95.72). If wave iv is complete then the USDJPY is headed to a new low in the coming weeks.
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We wrote in the daily chart analysis that wave iv in the USDJPY might be complete at 102.95 because a larger more complex correction is always possible; but more common with 4th waves. For example, the USDJPY could be in the early stages of a triangle. Even so, price would still come lower near term, probably below 98. In summary, remain bearish.
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STRATEGY: Bearish, against 102.93, target below 95.72
The GBPUSD declined in 5 waves from 2.1160, indicating that a significant top is in place. The 5 wave decline is viewed as either wave 1 in a 5 wave bear cycle or wave A in a 3 wave bear cycle. In other words, longer term bearish potential is great. The rally from 1.9337 is either wave 2 or B and is complete at 2.0396. The decline should accelerate this week or next if a 3rd wave lower is underway. The alternate is still longer term bearish but treats the decline from 2.0396 as wave X in a complex correction.
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Near term, we are concentrating on the decline from 2.0396. The drop from there is choppy and does not inspire confidence in the wave 3 bearish scenario. It is possible that the decline from 2.0396 is a leading diagonal and that a sharp 2nd wave is underway from 1.9648. The 50% and 61.8% of 2.0396-1.9647 are at 2.0021 and 2.0109. Remaining below 2.0047 keeps our most bearish count intact.
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STRATEGY: Bearish, against 2.0047, target 1.86
One possible count treats the drop from 1.1105 as wave 5 within a 5 wave drop from 1.3295. Under this count, a major low is in place at .9647 and the USDCHF will work higher over the coming weeks and months towards Fibo resistance; which does not begin until 1.0840.
The rally from .9647 to 1.0249 is best counted as a double zigzag (7 waves), which either completes a correction or is the first leg in a more complex correction. Given the action (nothing impulsive) since the 1.0249 top, we favor the latter. Look for support at .9838 (100% of 1.0249-.9871/1.0216) and .9776 (78.6% of .9647-1.0249).
The decline from the 2002 high at 1.6189 may be complete as a long term double zigzag corrective decline. If this count is correct, then a multi-year low is in place for the USDCAD.
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The latest bull leg (.9710-1.0324) is a wave 1 impulse within a 5 wave bull cycle (wave i of 1 is a diagonal). The drop to 1.0018 is wave 2 and wave 3 should be underway now; which will lead to a break above 1.0324 and much higher prices. Very near term, the break above 1.0223 suggests to us that the drop to 1.0132 was a small 2nd wave. Risk on longs can be moved to 1.0132
STRATEGY: Bullish, against 1.0132, target above 1.0324
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Longer term, the AUDUSD is in the process of forming a major multi year top. We view the advance from the 2001 low as an A-B-C advance. The rally from the 2004 low at .6771 is wave C. The rally through the November 2007 high at .9400 satisfies minimum expectations for wave 5 of C from .8512. However, it is not confirmed that a top is in place yet. The short term pattern will alert us to short opportunities.
We are treating the decline from .9470 (which may have been a truncation) as a series of 1st and 2nd waves. This bearish count remains valid as long as price is below .9353. It is also possible that the .9496-.8952 decline and .8952-.9344 rally are waves A and B in a larger correction. Either way, we remain bearish as long as price is below .9344.
STRATEGY: Bearish, against .9344, target below .8952
[B]Since the top in July at .8108, we contend that the NZDUSD is tracing out a large expanded flat. Wave B of the flat may be complete at .8215 and as such, a multi year top may be in place.[/B]
[B]The decline from .8215 is not an impulse and the rally from .7781 can be counted as an impulse (5 waves). The NZDUSD also broke above a short term resistance line last week. Near term, the NZDUSD is beginning to appear rather bullish. A rally through .8024 would warrant a bullish bias.[/B]
[B][/B]
[B]Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]
[B][/B]
STRATEGY is a quick summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughtout the week; these are published at separate articles at DailyFX.
TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.
ELLIOTT WAVE VIEW is our assessment of both the longer term (DAILY BARS) and shorter term (60 MINUTE BARS) EW structure. This is the basis for our STRATEGY.