USDJPY Potential Head and Shoulders Opportunity

  • Euro Rally is Wave b
  • Japanese Yen Head and Shoulders
  • British Pound Pressing Against Trendline
  • Swiss Franc Correction
  • Canadian Dollar Bearish (USDCAD Bullish) Pivot at 1.0500
  • Australian Dollar Up 11 Consecutive Days
  • New Zealand Dollar Objectives at .8049 and .8099

Commentary: The EURUSD briefly traded above 1.3832 today, hitting 1.3843 before pulling back to the 1.3800 figure. Because the rally from 1.3752 is in 3 waves, the ascent is most likely wave b within a flat correction. Look for wave c to come under 1.3752. The bigger picture remains bullish but risk of a more severe pullback is also possible as daily RSI remains above 70.

Strategy: Flat

Commentary: The break under 120.97 indicates additional bearish potential. Intraday charts show a head and shoulders pattern forming from the beginning of June as well. The pattern is confirmed on a break below 120.75. The next level of support would be the 50% fibo of 115.14-124.13 at 119.64. This level is defended by the 5/11 low at 119.46.

Strategy: Flat

Commentary: With 5 waves up from 2.0056 and with Cable pressing against the resistance line drawn off of the 6/12 and 7/3 highs, the risk of a reversal is high. We are looking for a correction to breing price back to at least 2.0468 and possibly parallel channel support (near 2.0375 today but increases 30 pips/day). The structure is bullish as long as price is above 2.0203.
Strategy: Flat

Commentary: Given the strong rally from 1.1980, it is likely that the USDCHF is tracing out a more complex correction from the 7/18 low at 1.1960. A push through 1.2064 wouls satisfy minimum expectations so be wary of getting long on a break through that level. If 1.2064 gives way, then former support at 1.2091 becomes potential resistance. If a triangle is unfolding from the low at 1.1960, then the USDCHF will range between 1.1960 and 1.2064 before a break lower.
Strategy: Flat

Commentary: We wrote Friday that “an inverse head and shoulders pattern may be playing out in the short term as well. A rally through 1.0477 increases confidence in the bullish outlook.” Still, we can not identify a clean 5 wave rally from the low to signal with confidence that the trend has indeed changed from bearish to bullish. 1.0400 remains key to the bullish case.
Strategy: Remain bullish, against 1.0400, target TBD

Commentary: The AUDUSD has closed up 11 consecutive days (today would be the 12th), but the rally from .8707 is choppy (possible a diagonal), which warns that upside momentum is waning. .8840 is a measured objective and the high this morning is at .8842. Risk of a reversal is high.
Strategy: Flat

Commentary: Kiwi continues to rocket higher and the next level of potential resistance is the 138.2% of .7463-.5928 at .8049. The 161.8% extensions of .7237-.7637/.7452 is at .8099 and is also potential resistance. Although Kiwi has extended, the form remains the same and we are looking for a 4th wave (within the 5 wave rally from .7237) to eventually unfold before a 5th wave makes a new high. The structure remains bullish.

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.