A break through the 3/10 high at 2.0220 in the GBPUSD would expose Fibonacci levels at 2.0250 and 2.0460. A rally to one of these levels could complete a large countertrend rally from 1.9337.
We mentioned yesterday that it was possible to count 5 waves up from 1.4438 and that “this [I]suggests[/I] that a major top is close at hand. As always, 5 waves down from 1.5460 would signal that a top is in place.” The quick drop to 1.5282 was likely the end of a wave 4 correction though (we mentioned this in the Elliott Wave forum yesterday). New highs are expected in wave 5. Wave 5 would equal wave 1 at 1.5601; an objective.
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The USDJPY has rallied as expected but failed to reach even the 38.2% of the 5 wave decline (104.15). With such little retrace (and with a sentiment extreme in place…see COT), we subjectively favor the idea that a larger more complex correction is underway. If this is the case, then the subwaves will be 3-3-5; a flat. In a flat, wave B (in this case X), will retrace most if not all of A. Therefore, a test of the 101.40 low is certainly possible before the rally in wave Y completes the correction. The 61.8% of 101.40-103.58 at 102.24 is potential support.
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STRATEY: EXIT LONG
We have concentrated recently on the fact that “the rally from 1.9361 is wave C within the A-B-C advance from 1.9337. Wave C should divide into 5 waves and so far there are only 3 waves up. As such, we expect additional gains. The next likely resistance point is the 61.8% at 2.0463.” If the count above is correct, then wave 1 of C is 585 pips (truncated), and wave 3 is 501 pips. Wave 3 can not be the shortest wave, therefore wave 5 must be no longer than 501 pips. A 500 pip rally from the wave 4 low (1.9995) places the end of wave 5 at 2.0495; very close to the 61.8% of 2.1160-1.9337 at 2.0463. Look to get bullish near 2.0090 if given the chance, against 1.9995, for the break above 2.0220.
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STRATEGY: Look to get bullish near 2.0090, against 1.9995, target 2.04
We are re-working the count this morning to show that the rally from 1.0134 may have simply been a 4th wave within the 5 wave drop from 1.1105. If this is correct, then price would come under 1.0134 in a 5th wave to complete the decline from 1.1105. A larger upward correction would then take place. An unorthodox channel line also provides resistance.
STRATEGY: EXIT LONG
We maintain a bearish bias against 1.0197. It is possible that a top is in at .9981 but a push through there would expose the 61.8% and 78.6% Fibo levels at 1.0011 and 1.0093 and not negate the larger bearish count. Preferably though, the price drop accelerates now and the USDCAD comes under .9710 while .9981 remains intact.
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STRATEGY: Bearish, against 1.0197, target TBD
We wrote yesterday that “it is also possible that the decline is complete as a double zigzag. Those that are willing can get long against .8874 in order to prepare for the run to 1.00 (or close to it).” This is our preferred count now and a bullish bias is warranted against .9147.
STRATEGY: Bullish, against .9147, target .9800
[B]Since the top in July at .8108, we contend that the NZDUSD is tracing out a large expanded flat. Wave B of the flat could test .8504 (127% of A) or .7634/69 (100% extension of a within B and 138.2% of A). The rally from .7874 is an impulse, which warrants a bullish bias. Near term, the entire rally from .7383 may be taking the form of an ending diagonal (overlapping and each leg consisting of 3 legs). [/B]
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[B]STRATEGY: Bullish, against .7874, target .8480[/B]
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Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]
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[1] STRATEGY is a quick summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughout the week; these are published at separate articles at DailyFX.