USDJPY 120.97 Key Level for Directional Bias

  • Euro Tough Time at 1.3800
  • Japanese Yen 120.97 Key Level
  • British Pound Tests 2.0400
  • Swiss Franc Ending Diagonal
  • Canadian Dollar Resistance (USDCAD Support) at 1.0385
  • Australian Dollar Objective at .8840
  • New Zealand Dollar Objective at .8099

Commentary: We wrote Friday that “the EURUSD could test 1.3800 again today before bearish potential comes to the forefront. We say this because the rally from 1.3731 may be tracing out an ending diagonal. If this is the pattern playing out, then we should see a spike through 1.3798 before a reversal.” The EURUSD spiked to 1.3813 Friday and currently rests below the figure. It seems likely that the next move of consequence will be a decline back towards the former 4th wave at 1.3568 Coming under 1.3731 instills confidence in the near term bearish case but only an intial 5 wave decline would signal that the trend has reversed.

Strategy: Flat

Commentary: The USDJPY rally from 120.97 is in 5 waves, which strongly indicates that the entire decline from 124.13 was an a-b-c correction. The decline from 122.61 has been corrective so far and ended near the 61.8% of 120.97-122.61 at 121.60. 120.97 must hold in order to keep the bullish structure intact. A rally through 122.18 instills confidence in the bullish case.

Strategy: Bullish now, against 120.97, target a break above 124.13, target TBD

Commentary: We wrote Friday that “there is no sign yet of a reversal but the long term structure indicates reversal potential. The near term strucutre certainly allows for a new high (above 2.0365) as the decline from 2.0365 is in a corrective 3 waves. A short term bullish bias is warranted above 2.0261, but strength above 2.0365 will likely be marginal. Until we see impulsive bearish price action, we will remain on the sidelines.” Cable tested the psychological 2.0400 figure this morning before reversing. Coming under 2.0319 warrants a bearish bias (for the reversal). It is also possible that an ending diagonal (shown on the chart today) is unfolding from 2.0261. If this is the case, then one more high (above 2.0366) is in order before the reversal.
Strategy: Sell break of 2.0319.

Commentary: It appears that an ending diagonal may be unfolding from 1.2068. A drop below 1.1984 would complete 5 waves down from 1.2232 and give scope to a correction back towards 1.2068.
Strategy: Move to flat (from bearish)

Commentary: The short term pattern is unclear so we continue to focus on the longer term potential for a bottom. “The reversal that we have been expecting may be underway but we would like to see a clear 5 wave advance to signal the turn and instill confidence in the upside. Coming under 1.0442 could see a test of the long term support line, near 1.0385 this week. We are showing the weekly chart with the wave count to illustrate why the USDCAD is close to putting in a significant low.”

Strategy: Flat

Commentary: The rally from .8162 is wave v of larger wave 3 (that began at .7415). The rally from .8162 does not look complete though. Sideways consolidation is likely to occur in small wave iv (of v of 3) before a new high is extablished. A measured objective for the end of the advance from .8162 is the 161.8% extension of .8162-.8476/.8332 at .8840.
Strategy: Flat

Commentary: A 3rd wave may be complete at .7930. Expectations now are for wave 4 to unfold and bottom close to .7777 before a new high in wave 5. Ultimately, a measured objective for the end of the rally from .7237 is the 161.8% extension of .7237-.7637/.7452 at .8099.

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.