Strategy this week: Expect a corrective USD rally to give way to the next bear leg.
-Focus on positioning for EURUSD long, USDCAD short, AUDUSD long
[B]SENTIMENT ANALYSIS[/B]
COMMITMENTS OF TRADERS
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[B]ELLIOTT WAVE VIEW[/B]
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We maintain that the decline from the November 2007 high at 1.4966 is the wave 3 top within a 5 wave advance from the June 2007 low at 1.3261. Since 1.4966, the EURUSD has either completed a flat as wave 4 or a triangle is still unfolding as wave 4. Either way, higher prices are expected in the coming weeks with objectives in the mid 1.50s. This could complete larger wave 3 within the 5 wave advance from the November 2005 low at 1.1638.
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
This is a close up view of what we are treating as wave d and expected wave e of the triangle (mentioned above). One reason to favor the triangle scenario is that the rally from 1.4365 is not an impulse and can be counted as a 3 wave rally, which fits as wave d of the triangle. Expect wave e to end near 1.4589/1.4659; this is the 61.8% to 50% of 1.4365-1.4953. Expect the correction to take the better part of the week, if not the entire week.
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
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. Since 124.13, the USDJPY has traced out a series of 1st and 2nd waves. The decline should accelerate in the next month in wave 3 of 3. This forecast remains intact as long as price is below 114.65.
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We maintain that the strong rally from 104.97 is a c wave that will complete a larger second wave as an expanded flat. Price is expected to exceed 107.92 and resistance should be strong in the 108.33/50 area. Look for a top and reversal near there. This count is intact as long a price is below 110.11.
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For the first time in months, the GBPUSD daily count is clear. The pair has 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 underway now is either wave 2 or B and we will look for a top in the 2.0033-2.0463 zone. This corrective rally probably lasts for weeks if not most of this month.
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The rally from 1.9337 to 1.9957 is a 5 wave advance and is probably wave A within the A-B-C corrective rally. It is possible that a B wave low is in place at 1.9626. However, B waves are notoriously tricky and usually not as clear as the drop from 1.9957 is now. This has us thinking that a triangle or larger flat will occur before the wave C advance towards 2.00.
Visit our recently updated British Pound Currency Room for specific resources geared towards this currency.
A corrective 4th wave rally may be underway now within the 5 wave decline from the October 2006 high at 1.2768. The USDCHF will likely trade in a choppy manner for the next month or so, but with an upside bias before a decline in a 5th wave completes the entire decline from the October 2006 high and gives way to a multi-year low.
The short term count in the USDCHF is not clear. The bigger picture suggests that a larger 3rd wave could be complete and that the USDCHF is entering a multi-week corrective pattern that will give way to lower prices. Very short term, it is possible to count 5 waves up from 1.0728 to 1.0919. A corrective decline that ends below 1.0875 presents a short term bullish opportunity against 1.0728.
The pattern in the USDCAD since the November low at .9055 is either an A-B-C rally that will lead to a new low (under .9055) or a 1-2 (expanded flat) base that will lead to a strong rally to new highs (suggesting that a multi-year USDCAD low is in place). Either way, price will come below .9755. Potential support from Fibonacci is at .9652 and .9511.
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The short term picture is clear. The decline from 1.0378 is clearly a 5 wave decline and an a-b-c corrective rally is underway now towards 1.0117. The next level of resistance is Fibonacci resistance at 1.0184. Look for a top and reversal near these levels in order to position for a drop below .9755.
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency.
As long as the AUDUSD rallies in 5 waves and declines in 3 waves, there is no reason to adopt a bearish outlook. The rally from .8512 is expected to exceed .9400 in the coming weeks. Objectives are near 1.00.
The spike low on 1/30 at .8817 may have completed a small 2nd wave within a 5 wave advance from .8512. As such, wave 3 is probably underway now. Look to get long on pullbacks. Potential support is at .8969 and .8941. Risk should be kept to .8817.
The drop on 1/22 to .7383 completed a large correction that had been underway since November. Like the AUDUSD, the NZDUSD trend remains up and an upside breakout will probably lead to a test of the July 2007 high at .8108.
The NZDUSD short term pattern is not clear. Still, given the daily count and the bullish AUDUSD count, it is reasonable to adopt a bullish stance against the 1/30 spike low (.7751). Potential support prior to that is .7869 and .7800.
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