US Dollar at a Crossroads

  • Euro Bearish Below 1.3680
  • Japanese Yen Bullish (USDJPY Bearish) Below 115.72
  • British Pound Unclear
  • Swiss Franc Thrusting From Triangle?
  • Canadian Dollar Tests Support
  • Australian Dollar Bear Wave Underway
  • New Zealand Dollar Bearish Below .7149

Commentary: Potential remains for a push to the 1.3750 area and a reversal. We warned yesterday though that "the advance from 1.3360 has stalled near the 61.8% retracement from the top (1.3852) to 1.3360. A larger more complex correction may be playing out. In this instance, the rally from 1.3360 would end up as an a-b-c rally with the rally from 1.3450 unfolding as wave c. Due to the extent of the decline from 1.3684 (which makes it unlikely that it is a 4th wave correction), a bearish bias is warranted on a break below 1.3563.

Strategy: Move to flat (from bullish), get bearish on a break below 1.3563

Commentary: We wrote yesterday that “it is possible that a top is in place at 117.12 as the decline from 116.74 could very well extend. With this in mind, a bearish bias is warranted against 116.25. If the decline does extend, then potential support is at the 8/22 low of 113.98.” The bottom last night was at 113.86 but we are viewing the rally since as a correction of the decline from 116.74. We are unsure of the internal wave count at this point but as long as price is below 115.72, the trend is towards lower prices and an eventual break of 111.59.

Strategy: Remain Bearish, move risk to 115.72 (from 116.25), target below 111.59

Commentary: Cable?s structure is unclear following the push above 2.0141 and therefore we will refrain from taking a strong stand either way this morning. "There are a few different valid wave counts at the current juncture but the one that we favor labels the entire decline from 2.0654 as large wave A. The rally since is large wave B (although the rally from 1.9651 could just be the first leg of wave B). Resistance should be strong near current levels, which is 2.0153 and 2.0271 (50%-61.8% of 2.0654-2.0153). The mentioned 161.8% is also at 2.0203 (middle of the fibo zone) and this is a previous congestion area."
Strategy: Flat

Commentary: With price action remaining choppy on a short term basis, we are showing the daily chart today for perspective. The daily chart shows a clear 5 wave rally from the December 2004 low to the November 2005 high. Everything since has been a correction. However, the correction is not complete. A complex correction has unfolded from the November 2005 high (W-X-Y). Wave X is a triangle, which means that we should expect a terminal thrust lower to complete the correction. The thrust to 1.1815 is most likely just the first leg of wave Y lower. As such, we are looking for price to come under 1.1815 before any meaningful bottom is in place.

Strategy: Bearish, move risk to 1.2046 (from 1.2215), targets 1.1562 and TBD

Commentary: After briefly trading above 1.0666, the USDCAD has come off again. One possibility is that the rally from 1.0470 completed an expanded flat correction from 1.0531. However, the longer term charts (we are showing the weekly today) indicate that a significant bottom may be in place at 1.0340. A rally above 1.0676 most likely leads to a break above 1.0866.
Strategy: Flat

Commentary: We wrote yesterday that “this morning?s rally from .8206 to .8278 is clearly in 3 waves (to this point). A break below .8206 warrants bearish action.” The Aussie broke below .8206 and continued on for a test of .8050. With the rally from .7673 to .8333 in a clear 3 waves (which is a correction), the dominant trend is down.
Strategy: Remain bearish, against .8333, targets .8072 and TBD

Commentary: We wrote yesterday that “a small 5 waves down appears to have unfolded from .7272 to .7042 and a correction ended at .7149. Look lower.” Kiwi plummeted from .7149 to .6869 and the decline is an impulse. Similar to the Aussie, the rally from .6639 to .7272 is in 3 waves, indicating that the larger degree trend is down.

Strategy: Bearish now, move risk to .7149 (from .7272), targets TBD
***JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTREND uses the last 4 weeks of price data (highs, lows, closes). An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.