US Dollar Completing Initial Leg of a Larger Bull Move

[B]- Euro Gets Hit

  • Japanese Yen Loses 121.00
  • British Pound Bulls In Trouble
  • Swiss Franc Confronts 100 day SMA
  • Canadian Dollar Oscillates Near 1.1000
  • Australian Dollar Small 5 Down From .8349
  • New Zealand Dollar Rejected at 20 day SMA

EURUSD - We wrote yesterday that “we continue to look for the bigger turn due to the sentiment extreme (as evidenced by COT). The rally from 1.3462 has stalled at the 61.8% of 1.3680-1.3462 at 1.3597 (the high is at 1.3609) and hourly RSI has rolled over from above 70, suggesting that we will see at least a pullback. The long candle on the 240 minute chart (see below) also warns of additional bearish price action.” The EURUSD turned lower and fell hard yesterday in a small 3rd wave. The consolidation since is a 4th wave and a drop under 1.3504 would complete 5 waves down from 1.3609. We will look for consolidation/bounce following a drop under 1.3609 in order to align with the downtrend. Price is under the 20 SMA, which is rolling over and exhibits negative slope.

USDJPY - We said yesterday that the USDJPY could chop higher towards trendline resistance at 121.00 and the pair has skyrocketed the last two days and currently trades just above the figure (121.00). Trendline resistance should be strong here but getting short is risky business until there is some sign that the pair has turned. Hourly RSI is at a momentum extreme (above 80), which makes it likely that any pullback will lead to a new high to create a divergence with the oscillator (rarely does a momentum extreme coincide with the actual high).

GBPUSD - Cable is breaking down as price has broken under the 5/15 low of 1.9746. A shirt term measured objective is at the 100% extension of 2.0131-1.9841/1.9997 at 1.9707 but we expect this decline to eventually challenge the 161.8% extension at 1.9528. Former daily lows from late March/early April are at 1.9545/89 (there is a trendline dating to June 2006 there as well). At this point, the pattern from 2.0131 appears to be playing out as a double zigzag (which is what we suspected was playing out earlier in the week) - which points to lower levels.

USDCHF - “The longer term wave structure is bullish as the decline from 1.2571 is a double zigzag (inverse of the EURUSD rally). A longer term inverse head and shoulders pattern (May 2006, December 2006, April 2007) is also visible.” Ultimately, we expect this rally to span weeks and target 1.2571. Daily RSI and MACD have just crossed above there midpoints and price is close to challenging the 100 day SMA (the 20 day has turned up and the 50 day is trying to turn up now). Short term channel resistance is at 1.2290 and increases about 6 pips per day. Channel support is at 1.2140 (also increases about 6 pips per day).

USDCAD - We wrote yesterday that “the decline from 1.1168 is either a B wave in an A-B-C correction that will end above 1.1168 or the 5th wave of the decline from 1.1825. Either way, downside potential is limited. In the former scenario, the rally begins from before 1.1005. In the latter scenario, the pair will make a slight new low before reversing higher and tracing out a correction (which would be a 4th wave) of the decline from 1.1825.” The ‘latter? scenario is the one that occurred and there may be an intermediate term bottom in at 1.0965. Look to align with the downtrend on a bounce towards 1.1168.

AUDUSD - We maintain that a C wave decline is underway towards the 100% extension of .8390-.8168/.8349 at .8127. Near term, there are 5 waves down from .8349 in what is wave 1 in what should prove to be a 5 wave bearish sequence (C wave will be 5 waves). We are looking for a bounce in a second wave towards the former 4th at .8268 before the next leg down occurs.

NZDUSD - We wrote yesterday that “with Kiwi unable to push through the 20 day SMA the last 3 days, it seems wise to adopt a neutral / cautious bearish stance against .7403 (a psychological figure as well at .7400).” The short term structure is not nearly as clear as the short term structure for the AUDUSD but remaining below .7403 keeps the bearish bias strong. .7343 is initial resistance and .7367 is the 61.8% of .7403-.7308.