A longer term broad based USD rally is underway. The commodity dollars have led the way but expect the Euro to catch up soon.
The EURUSD remains in the range that has held since late April. We view the correction as wave 4 within the advance from 1.1640. Wave V will take the EURUSD higher, maybe even above 1.70, but we have yet to determine if wave 4 is over. Previously, we’ve stated that wave 4 was over at 1.5468 (as a triangle) but the decline from 1.6039 has us seriously doubting that count. Instead, wave IV could be unfolding as a flat; which would not end until below 1.5283.
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
IF a flat is unfolding instead of a triangle in wave IV, then the rally to 1.6039 wave B of the flat. As mentioned, wave C would be underway now. A big reason for flipping to a bearish bias rather than staying bullish is the extent of the drop from 1.6039. The decline from 1.5944 far exceeds the length of 1.6039-1.5783, making it likely that bears have taken control. Taking out 1.5611 would bring an end to the series of higher lows and bolster the bearish case. Near term, the push through 1.5750 should complete a small c wave. Expect resistance near 1.58 (Fibo and congestion).
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
STRATEGY: Bearish, against 1.5944, target below 1.5283
One count treats the drop from 124.13-95.72 as a W-X-Y decline (7 waves, which is corrective). However, it is not clear where this fits in the larger pattern (take a look at the monthly, and it is quite clear that the USDJPY has broken from a 4th wave bearish triangle). The other count is that the decline from 124.13 is a leading diagonal. Under this count (and given near term weakness), the entire advance from 95.72 is unfolding as a second wave. As long as price is below 108.57, it is possible but not probable, that a wave 2 top is in place. If the drop from 124.13 is indeed a leading diagonal, then expect a deeper retracement (leading diagonals often give way to a 78.6% retracement). If wave b of 2 is complete at 103.76, then wave c = wave a at 116.61.
Visit our recently updated Yen Currency Room for specific resources geared towards this currency.
Preferred count: The advance from 95.72 is wave W in a W-X-Y complex correction and the drop from 108.57-103.76 is wave X. Wave Y is underway towards 116 (equality with wave W). Alternate: price action from 108.57 is forming a triangle in wave X. The best strategy is to play a bullish break. Look for support in the 107.15/33 area (Fibo zone).
Visit our recently updated Yen Currency Room for specific resources geared towards this currency.
STRATEGY: Get Bullish near 107.15, against 106.58, target above 108.57
Bigger picture, a 5 wave advance from 1.7047 is complete at 2.1160. Therefore, a large 3 wave correction is underway from 2.1160. The first leg of that correction (A) is complete at 1.9337. With the rejection of strength at 2.0156 last week, the triangle count (as wave B) seems to be the correct count. If so, then wave d of the triangle is headed towards 1.9550/1.96 over the next few weeks.
Visit our recently updated British Pound Currency Room for specific resources geared towards this currency.
The GBPUSD tested and held the trendline drawn off of the 6/13, 7/7, and 7/8 lows. Still, it is likely that wave D of the triangle is underway towards 1.9550/1.96. This is our stance as long as price is below 2.0075.
Visit our recently updated British Pound Currency Room for specific resources geared towards this currency.
We advance from .9647 is corrective but recent price action makes it probable that the .9647-1.0624 advance was just the first wave in a complex correction. The reason for the change to the count is that the drop from 1.0624 is corrective as well. Expect a push through 1.0624 over the next few weeks / months in order to complete wave 4.
A major reason that we have switched to a generally USD bullish bias is the USDCHF. The pair has broken above a channel that has held since early May. Under this count, the 3 wave rally from .9647 was wave W in a complex correction. The choppy decline from above 1.06 serves as wave X and wave Y is underway now. As mentioned, expect the advance to reach 1.10 (former 4th wave). Look for support beginning at former resistance from 1.0260.
Regardless of the larger pattern, the advance from .9055 is unfolding as a large correction. However, wave C (often the strongest leg of a correction) has yet to commence. A triangle is complete as wave B within an A-B-C pattern and expectations are for a break through 1.0378 soon.
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency.
This is a closer look at the triangle. The rally from the wave E low is taking on an impulsive form, which inspires confidence in the bullish outlook. We’ll discuss objectives when warranted. 1.0178 is support (if tested).
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency
STRATEGY: Bullish, against .9974, target above 1.0378
The weekly chart of the AUDUSD puts into perspective just how significant of a top may have formed at .9849. Price spiked through the upper channel line last week and is now testing a resistance line drawn off of the August 2007, January 2008, and June 2008 lows. Expect a bearish break.
For the first time in a long while, the AUDUSD has declined impulsively (5 waves); indicating with a high probability that the pair has formed a significant top. A corrective advance is underway now. The first potential resistance level is .9649 (Fibo and just above former congestion). The long term trend is considered down as long as price remains below .9849.
Kiwi is a bit ahead of the AUDUSD in terms of its longer term structure. The decline is clearly more mature but still has a ways to go. The break of .7445 signals makes it likely that price will remain below .7761 going forward. Watch the longer term trendline drawn off the June 2006 and August 2007 lows. This level should provide at least interim support.
The drop below .7445 confirms that a major top is in place. Price should remain below .7761 near term and resistance is expected in the .7487-.7530 zone.
STRATEGY: Get bearish, near .75, against .7761, targets below .70
[B]Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]