• Euro In Wave C Lower?
• Japanese Yen Reverses Ahead of 118.00
• British Pound Count Unclear
• Swiss Franc Follows Euro
• Canadian Dollar Reversal
• Australian Dollar Diagonal Gives Way to Reversal
• New Zealand Dollar Decline Looking Impulsive
SEE A DECRIPTION AT THE BOTTOM OF THIS REPORT FOR JTRENDW AND JTRENDD
Commentary: There are two counts that we are tracking closely. One treats the decline from 1.4281 as wave A on a larger correction. The subsequent rally would be wave B and wave C would be underway now. Under this scenario, the decline is likely to extend to at least 1.3978 (100% extension of 1.4281-1.4015/1.4243). This count is favored due to the sentiment readings from the COT report which strongly suggests that the US Dollar is nearing a bottom. The alternate count treats the rally from 1.4015 as wave i of a new bull cycle with a smaller a-b-c correction unfolding now.
Commentary: We wrote yesterday that “the risk of a reversal is high as the USDJPY closes in on 118.00. 118.12 is the 100% extension of 111.59-117.12/112.59. A rally to 118.12 would possibly complete larger wave 2 within a 5 wave bear cycle that began at 124.13.” If the decline from 117.93 unfolds in 5 waves, then we will look to get bearish on the pullback. At this point, the decline appears to be in wave iii of 1. A bearish bias is warranted against 117.46.
Commentary: We wrote yesterday that “the count is not as clear as the EURUSD due to the overlapping waves within the rally from 1.9651. It is possible that the overlapping waves are a series of 1st and 2nd waves. In this instance, Cable should accelerate higher with 2.0245 remaining intact. The other possibility is that the pair is stuck in a larger correction from 2.0654.” The count is still not clear although the quick decline does favor the larger correction scenario. Under this scenario, 2.0477 should remain intact and price would be on its way to below 1.9651.
Commentary: The decline from 1.1894 is clearly not an impulse so we are standing down from the bearish bias against 1.1894. The terminal thrust from the longer term triangle may be complete as a 3 wave decline (Y wave) and a bottom may be in place at 1.1623. Given the possibility that the rally from 1.1623 is an impulse, a bullish bias is warranted against 1.1623.
Commentary: We were expecting a bottom to form and wrote yesterday that “a sharp rally in 5 waves would signal that a tradeable low is in place.” That 5 wave rally did occur and was followed by a clear 3 wave setback to .9743. Our working assumption is that the rally is extending higher in wave iii as long as price is above .9743.
Strategy: Bullish now, against .9743, target TBD
Commentary: Yesterday, we wrote that “the overlapping nature of the rally from .8794 is suggestive of an ending diagonal in the Aussie as well. A drop below .8951 would be the first signal of a top.” The drop below .8951 led to a drop to .8831 very quickly. The decline from the top (.9077) looks just like the USDJPY decline. As such, the analysis is the same. If the decline unfolds in 5 waves, then we will look to get bearish on the pullback.
Commentary: The Kiwi decline is taking on an impulsive look. Expect some additional consolidation in small wave iv before a drop to a new low in wave v, which would complete a 5 wave bear cycle from the top (.7785). A larger pullback should follow, which would present an opportunity to get bearish against the high.
Written by Jamie Saettele, Technical Currency Startegist for DailyFX.com