US Dollar Setting Up for Bulls

  • Euro 1.3750 Reversal Point
  • Japanese Yen 119.50 Reversal Point
  • British Pound Triangles Everywhere
  • Swiss Franc Wedge Remains In Place
  • Canadian Dollar Beautiful Setup
  • Australian Dollar .8664 Reversal Point
  • New Zealand Dollar Correction Unfolding

Commentary: As we wrote yesterday, “it seems likely that a more complex correction is playing out from 1.3608. The rally from 1.3608 to 1.3727 is wave a and the decline from there is wave b. A rally in wave c towards 1.3750 is expected before a reveral and drop under 1.3608. This places the dominant 3 wave decline from 1.3852 as larger wave A and everything that has followed as larger wave B.” This seems to be playing out, so we are sticking with it.

Strategy: Remain bullish, against 1.3608, targets 1.3750 (then flip to short against 1.3852)

Commentary: The USDJPY is unfolding as expected. We wrote yesterday that “we are execting the USDJPY to gain correctively until 119.50 before another leg lower brings price under 117.60.” Price stalled at 119.38 yesterday and the 200 day SMA is at 119.59, which reinforces resistance at that level. The drop under the 200 day SMA suggests a longer term reversal is underway.

Strategy: Move to flat (previously bearish)?look to get bearish close to 119.50 (against 120.73)

Commentary: The GBPUSD is also unfolding as expected. “We have treated the rally from the 7/29 low at 2.0181 as wave B in a large A-B-C correction from 2.0654 (same pattern as the EURUSD).” We wrote yesterday about the triangle that had formed from the 8/1 high and mentioned that we were expecting a terminal thrust towards the 2.0400/73 level. 2.0400 is the 100% extension of 2.0181-2.0378/1.0203 and 2.0473 is the 61.8% of 2.0654-2.0181. Price has satisfied minimum expectations for the thrust from that triangle but yet another triangle has formed overnight. Look for a terminal thrust from this triangle (red lines) into 2.0400/73 before a reversal.
Strategy: Move to flat (from bullish), look to short between 2.0400/73 against 2.0654, targeting a drop under 2.0181

Commentary: The wedge idea that we have focused on in recent days seems to be working. “The decline from 1.2165 could be a diagonal (wedge) in the B position in a large A-B-C correction from 1.1960. This would suggest that wave C will exceed 1.2165 before the next leg lower occurs.” Exceeding 1.2165 satisfies minimum expectations. The 50% of 1.2468-1.1960 at 1.2214 is a potential reversal point. We are least confident in the USDCHF pattern and see better opportunities elsewhere.
Strategy: Flat

Commentary: USDCAD may the opportunity of the month. “The rally from 1.0340 is clearly impulsive, signaling that the trend has changed from down to up. Wave c of the a-b-c correction from 1.0699 is unfolding now and should bottom in the 1.0477-1.0562 zone. This is the 61.8% to 38.2% of 1.0340-1.0699.” The USDCAD is finding support in this reversal zone and the rally from 1.0508 may unfold impulsively. It is possible that the pair chops lower to test the bottom of the zone at 1.0477 (alternate arrows in red). Regardless, long USDCAD is one of the best opportunities igoing forward. 1.0340 is the line in the sand.
Strategy: Bullish now, against 1.0340, target TBD

Commentary: No change to the Aussie. "Bigger picture, the decline from .8870 is the beginning of larger wave 4 within the 5 wave rally from .7268. Over the next several weeks, the AUDUSD could decline to the former 4th wave at .8162. Wave A of the decline ended at .8458 and wave B is underway now. Wave B is unfolding as a flat. The last leg of the flat is unfolding now and we are looking for an extension to above .8615 before wave C of the correction brings price much lower. A potential reversal point is .8664 (50% of .8870-.8458).
Strategy: Look to get bearish in .8664/.8713 zone, against .8870, targeting below .8443

Commentary: “NZDUSD is in the exact same position as the AUDUSD. A larger B wave or (2nd wave) is unfolding from .7553, which we expect to exceed .7731 before wave C (or 3rd wave) brings price much lower. The 38.2% of .8108-.7553 at .7765 is an objective for the end of the rally from .7531.”

Strategy: Flat
*JTREND is a proprietary calculation that uses recent highs, lows and closes to determine the trend. JTRENDLT is the longer term trend and uses the last 4 weeks of price data. JTRENDST is the shorter term trend and uses the last 5 days of price data. An example is below. Blue bars denote bullish trend and red bars denote bearish trend. The chart below is the EURUSD weekly chart.