USDJPY Closing In On Potential Reversal Zone

  • [B] Euro Bullish Above 1.4032 [/B]
    [B]- Japanese Yen Close to Key Level[/B]
    [B]- British Pound to Test 2.0500[/B]
    [B]- Swiss Franc Already Turned?[/B]
    [B]- Canadian Dollar Close to a Turn[/B]
    [B]- Australian Dollar Could Trade Back to .8600[/B]
    [B]- New Zealand Dollar In Reversal Zone


Commentary: The EURUSD is not so clear right now. We see evidence of both a bullish and bearish count. The bullish count has an a-b-c correction ending at 1.4032, which means that the EURUSD should rally to a new high before reversing. For now, the bullish count is favored but a drop below 1.4032 would make change the short term bias to a bearish one. Strength above 1.4281 (if price reaches there) should prove marginal though. 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 regardless of what happens in the next few days.

Strategy: Bullish now, against 1.4032, target 1.4281 (flip to short on drop below 1.4032)

Commentary: We expect this week to be interesting for the USDJPY and the Yen in general. We have maintained for some time that the pair is headed to at least 118.00. A rally to this level would complete an A-B-C corrective rally from 111.59. 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. In summary, the reversal zone is 118.12/119.84. We will wait for evidence of a top in this area before committing to the bear side.

Strategy: Remain bullish, risk at 115.55, target 118.00 (watch for a top and reversal at 118.00/120.00)

Commentary: The GBPUSD decline from 2.0654 is clearly in 3 waves and is therefore corrective. However, the advance from 1.9879 is far from impulsive at this point as every top overlaps with every low. Since the rally is not an impulse, and therefore not a 3rd wave is expected to break above 2.0654 , then what is it? We proposed a double zigzag count last week, which we still see as the most probable count (a double zigzag is a complex correction). If the rally is corrective, then the everything from 2.0654 is part of a larger correction such as a triangle or a flat. Under this interpretation of the pattern, price is expected to exceed 2.0494 but then reverse.

Strategy: Flat

Commentary: Last week, we wrote, that “a bullish opportunity exists in the USDCHF. 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). Expect small wave c of the correction to test 1.1696 (61.8%) / 1.1711 before the next advance begins.” The correction actually ended before the extimated support, at 1.1738. Still, the short term trend is up and there is potential for a test of former resistance at 1.1922.

Strategy: Bullish now, against 1.1738, target TBD

Commentary: We have stayed away from ‘picking a bottom? in the USDCAD and for good reason. The wave structure was simply not complete. But, we are getting very close. One more low (below .9784) may complete the decline from 1.0866. If wave 5 is to equal wave 1, then the USDCAD decline is likely end near .9680. A small 5 wave advance followed by a 3 wave setback will turn us bullish for the large recovery. Watch the weekly and monthly pivot calculated pivot supports for possible reversal points (table on page 1)

Strategy: Flat

Commentary: We wrote last week that “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).” With the rally stalling at the .9000 figure and with 9 waves up from .8051 (see last week?s analysis for more on this), the probability of a reversal is high. We will wait for evidence (small 5 down) to confirm our bearish bias.

Strategy: Flat

Commentary: Last week, we wrote that “the decline from .7668 is clearly a 3 wave correction?so expect at least a test of the high prior to a larger setback that occurs over the next few weeks. With 5 waves already up from .6824, the decline from .7668 could be wave a of a larger correction, likely a flat. b waves in flats often test the origin of wave a and it is not uncommon for the b wave to exceed the origin of a.” After briefly trading above .7668, price may be rolling over in wave c that should come under .7501.

Strategy: Flat