Near term, a dollar rally is expected, but the rally likely proves corrective. Expectations are for the buck to continue fall for the balance of March.
While the specific count eludes us, it is worth noting that the rally from the 2005 low at 1.1640 is now in 15 waves (derivative of a correction). The latest breakout is from a triangle, which is a terminal pattern. Expectations are for a top and reversal in the next few weeks that gives way to a corrective decline that could last over a month or more.
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The entire rally from 1.4438 could be complete at 1.5460 . Wave 5 exceeded where it would equal wave 1 at 1.5391. It is possible that wave 5 extends closer to where wave 5 would equal 61.8% of waves 1 through 3 at 1.5635. 5 waves down from 1.5460 would signal that a top is in place. Potential support is the 1.5250/1.5300 zone.
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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. . There is plenty of room for the USDJPY to fall over the next few weeks and months. There are Fibonacci extensions (161.8) at 97.64 and 98.06.
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A5 wave drop from 108.35 may be complete at 101.40. This does not change the long term bearish call for the pair to test the 1995 low near 80, but it does suggest that at least a correction is due; possibly all the way back to 104.
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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 nearing a top. The Fibonacci reversal zone is 2.0033-2.0463; which Cable is in the middle of now.
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The rally from 1.9361 is wave C within the A-B-C advance from 1.9337. Wave C should divide into 5 waves and so far there are only 3 waves up. As such, we expect additional gains. The next likely resistance point is the 61.8% at 2.0663. Look for support in the 2.0028/2.0100 zone.
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The drop from 1.1103 (wave 3 within the 5 wave drop from 1.1591) is complete as there are 5 waves down. Look for a correction to reach 1.0458 over the next few weeks. This rally should prove corrective.
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). The chart today shows the latter count. In the case of the latter, the drop from 1.0378 has satisfied minimum expectations by coming under .9755. We will be able to indentify a low from the wave structure on the hourly (once we see 5 waves up).
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The drop from .9976 could be the beginning of wave 3 lower within the 5 wave bearish cycle from 1.0197. The alternate count treats the up-down sequence from .9710 as waves a and b. Therefore, keep risk above 1.0197.
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STRATEGY: Bearish, against 1.0197, target TBD
</p> The weekly chart zooms in on the A-B-C advance from the 2001 low and in particular wave C from .6771 (July 2004 low). As is evident on the chart, the rally through the November 2007 high at .9400 satisfies minimum expectations for wave 5 of C. However, we still expect a test of 1.00 before the major reversal takes place.
The 60 minute chart zooms in on the rally from .8512 (January low). The rally from .8512 is viewed as wave 5 of large C. So far, there are only 3 waves complete to .9496. The drop to channel support is wave 4 and may be complete at .9218. If .9218 fails to hold, then look the wave 4 low to form close to .9111; the former 4th wave. If price drops below .8874, then the probability increases significantly that a multi-year top is in place at .9496.
[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 could test .8504 (127% of A) or .7634/69 (100% extension of a within B and 138.2% of A). As of now, risk is at .7921.[/B]
[B]It is possible that the decline from .8214 to .7921 is in 5 waves and that a larger expanded flat is unfolding now. Kiwi has held above .7900, which is supported by a line drawn off of the 2/5 and 2/13 lows. As long as price is above .7781, upside potential remains. [/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 reports and analysis of news headlines. Studies done by Jamie Saettele (to be published in an upcoming book) indicate that the greatest number of headlines and the most negative headlines about a currency appear at bottoms and that the greatest number of headlines and the most positive headlines about a currency appear at tops.
[/B]</p> The drop from 1.1591 is viewed as wave 5 within the 5 wave drop from 1.2569. Within this 5th wave, the USDCHF is currently in wave iii of v, which should is probably close to an end. Expectations for next few weeks are for price to rally in wave iv of v and test former congestion near 1.0430 before registering a new low to complete larger wave 3.