If our EURUSD bearish count is correct, then the pair needs to accelerate lower this week. The USDJPY is likely to form another significant top this week or next and Cable should accelerate lower as well.
The exceptionally strong rally since June 2007 is a 3rd of a III wave rally but may be over. Wave 4 of III is expected 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.
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Near term, both legs of the down-up sequence from 1.5904 are not clear impulses. This makes it likely that a larger correction is underway; either a triangle or a flat. In either case, waves A and B are complete and wave C is underway towards lower prices. In the case of a triangle, the EURUSD would come under 1.5510. In the case of a flat, the EURUSD would continue to decline until dropping below 1.5342. Ideally, price remains below 1.5772.
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STRATEGY: Bearish, against 1.5772, target TBD
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). The advance is very close to complete as price is pressing against the 38.2% of 114.65-95.72.
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The A-B-C correction should come to an end this week or next. Wave C is viewed as underway from 98.56. Wave C would equal wave A at 103.88, very close to the former 4th wave extreme at 103.58. See EURJPY for additional Yen trade ideas.
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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. Price should remain below 2.0191
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On Friday, Cable tested a resistance line drawn off of the 3/14 and 3/27 highs and failed. This level is also defended by the 61.8% of 2.0191-1.9728 at 2.0014. The failure inspires confidence in the bearish bias against 2.0191.
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STRATEGY: Bearish, against 2.0191, 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.
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 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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Near term, 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). Therefore, wave 2 is underway now. Specifically, the drop from 1.0324 is wave a of 2. The wave 2 correction will probably continue for a few more weeks before ending closer to .9950 (61.8%) / 1.00 (former resistance). This is where we will look to get long.
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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 was a truncation) as a series of 1st and 2nd waves. This bearish count remains valid as long as price is below .9353. However, confidence in the pattern is low, especially given the fact this count doesn’t even work unless we count .9470 as a truncation. If we see evidence of weakness, then we’ll look for a short opportunity.
[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] [B]There is no change to the NZDUSD bearish count. “Our confidence in the bearish count that we proposed a few weeks ago has grown. We view the rally from .6639 to .8215 as a large expanded flat (A-B-C). Wave C of that rally is an ending diagonal (waves 1-2-3-4-5 are overlapping and each subdivide into 3 waves). Bigger picture, .8215 may be the end of wave B from .5927. Price is expected to eventually come under .5927.” Near term, the NZDUSD needs to stay below .8101 in order for the bearish count to remain favored.[/B]
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[B]STRATEGY: Bearish, against .8101, target TBD [/B]
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[B]Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]
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[1] 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.
[2] 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.
[3] SENTIMENT ANALYSIS takes into account COT data
[4] 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.