USDJPY Vulnerable to Reversal as Pair Approaches 118.00

[B]• Euro Bullish Above 1.4154
• Japanese Yen Approaches Important 118.00 Figure
• British Pound Bullish Against 2.0245
• Swiss Franc Wave 4 Complete at 1.1894
• Canadian Dollar Diagonal?
• Australian Dollar Diagonal Warns of a Top[/B]

Commentary: Near term, the EURUSD is bullish as long as price is above 1.4154. We expect price to exceed 1.4281 while 1.4154 remains intact. The decline from 1.4241-1.4154 is clearly a 3 wave correction and may be wave 2 within a new 5 wave bull cycle from 1.4015. In this case, the rally should accelerate in wave 3 in the next day or 2 and is expected to exceed at least 1.4380 (where the rally from 1.4154 would equal the 1.4015-1.4241 rally).

Strategy: Bullish against 1.4154, target TBD

Commentary: 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. Still, there is no sign of a top yet and a rally much beyond 118.00 would suggest that the USDJPY is headed to the next potential resistance closer to 120.00 (119.34/84).

Strategy: Flat

Commentary: The corrective nature of the decline from 2.0494-2.0245 strongly suggests that the GBPUSD will exceed 2.0494 near term. The same can be said for 2.0654 since the decline from 2.0654-1.9651 is also corrective. 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. With the count in the EURUSD very bullish, we will favor the more bullish interpretation in Cable as well.

Strategy: Flat

Commentary: The USDCHF is playing out as expected. We wrote last week that “a new low (beneath 1.1623) remains very much a possibility as long as price is below 1.1960 since the rally from 1.1623 could be a 4th wave.” Favor a new low to complete the terminal thrust from the triangle (shown on the daily chart) before a significant bottom is in place.

Strategy: Bearish, against 1.1894, target TBD

Commentary: The USDCAD continues to chop lower although it does appear that the decline from 1.0866 is nearing an end. We are treating the decline from 1.0094 as wave 5 within the 5 wave bear cycle from 1.0866. Under this count, wave 5 of 5 began at .9894 and may be close to complete as an ending diagonal. A sharp rally in 5 waves would signal that a tradeable low is in place.

Strategy: Flat

Commentary: 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. Until then, there is no reason to fade multi-decade highs.

Strategy: Look to get bearish following a rally through .8966, against .9032, target TBD

Commentary: The rally from .6824 is either wave 3 within a bull cycle from .6639 or wave C within an A-B-C correction from the same level. A measured objective for the end of the rally is the 161.8% extension of .6639-.7272/.6824 at .7845. A new high above .7785 satisfies minimum expectations for the end of the rally from .7501 (wave 5).

Strategy: Flat