US Dollar: Expect Marginal Weakness Then a Larger Recovery

  • Euro Alternate Bearish Count
  • Japanese Yen Pressing Against Top of Range
  • British Pound Decline is Corrective
  • Swiss Franc 5 Waves From 1.1623?
  • Canadian Dollar In Wave 4 Correction
  • Australian Dollar To Exceed .8947 Before Reversal
  • New Zealand Dollar Could Test .7730 Before Reversal


Commentary: We want to present a bearish alternate count today. It is possible that the 1.4281-1.4139 decline is a 5 wave decline with wave 5 truncated (not finishing below wave 3). The subsequent setback to 1.4201 would be wave 2 and wave 3 would be underway now. Under this interpretation of price action, a bearish bias is warranted against 1.4201. The entire decline may be just an a-b-c correction though, which leaves the EURUSD vulnerable to another high (above 1.4281). Still, we do expect at least a return to 1.3828 (former 4th wave) and possibly 1.3712 (61.8% of 1.3360-1.4281) over the next 3 to 4 weeks. The red arrow shows what price will do under the alternate count presented today. The black arrows show what price is likely to do if the decline from the top is a correction. As mentioned, a return to 1.37/1.38 is expected either way.

Strategy: Flat

Commentary: “We have continued to state that we expect a return to 118.00 in order to complete wave C of the A-B-C from 111.59.” There is no reason to change the outlook for a rally to exceed 117.12 (minimum) as the USDJPY is testing the upper end of its nearly 7 week range. Price should remain above 115.28 and preferably 115.55 under the bullish interpretation. It is important to remember that we expect a top and reversal near 118.12 (100% of 111.59-117.12/112.59). A push through this level exposes the 61.8% of 124.13-111.59 at 119.34.

Strategy: Remain bullish, risk at 115.55, target 118.00

Commentary: The decline from 2.0494 still looks corrective but the advancing legs from 1.9879 all overlap, suggesting that the larger rally is corrective as well. A double zigzag may be unfolding from 1.9879. If this is the case, then price will exceed 2.0494 before a reversal. All of the corrective action from the July high at 2.0654 suggests that a triangle or flat is unfolding. This is now our favored outlook so rallies should be sold against 2.0654.
Strategy: Flat

Commentary: The USDCHF is in a very interesting position. The rally from the low (1.1623) may be a 5 wave rally. Waves i and iv do overlap but Elliott?s rules allow for some overlap intraday with highly leveraged markets (FX and futures). Under this interpretation, price should undergo a brief correction in either wave b or 2 with support strong near 1.1711. This would present an opportunity to align with wave c or 3 higher.
Strategy: Look to get bullish close to 1.1711, target 1 at 1.1900

Commentary: There is no change to the USDCAD outlook. We expect a rally from current levels in wave 4 to end near 1.0094 before a drop to yet a new low in wave 5 completes the bearish cycle from 1.0866. Following the completion of wave 5 (should occur next week or in 2 weeks), the opportunity presents itself to align with bulls for a large recovery (maybe back to 1.0866).
Strategy: Flat

Commentary: With the decline from .8947 clearly a corrective one, we see it as probable that .8947 will be exceeded prior to a reversal. Impulses are always in 5 waves or derivations thereof (such as 9, 13, 17, etc.). A rally to a new high (even if just a slight new high) above .8947 would satisfy minimum expectations and then lead to a reversal. A large corrective decline should follow (possibly back to .8600).
Strategy: Flat

Commentary: The rally from .6824 is either the end of a correction (wave C) or wave 3 within a 5 wave bull cycle from .6639. Price has stalled within the former congestion zone (.7531-.7731). A larget setback over the next few weeks to the former 4th wave at .7304 is expected but that does not mean that a new high above .7668 will not occur before the larger decline occurs. In fact, with the decline to this point appearing corrective (3 waves), expect a new high and possibly a test of .7730 before a reversal.

Strategy: Flat
JTRENDW uses 13 week RSI in order to gauge strength of trend. The trend is considered Bullish if the indicator registers a reading above 60. The trend is considered Bearish if the indicator registers a reading below 40. If the reading is between 40 and 60, then the reading is Flat. The JTRENDD uses 13 days of data. An example of JTRENDW is below for the EURUSD.