Yen Reversal Confirmed - Potential Reversal Play In Kiwi

  • Euro Correcting Lower Before Thrusting Higher
  • Japanese Yen Reversal
  • British Pound Correcting Lower Before Thrusting Higher
  • Swiss Franc Extends Gains (USDCHF Losses)
  • Canadian Dollar Finding a Base
  • Australian Dollar 5 Waves Up
  • New Zealand Dollar Reversal Opportunity


Commentary: The EURUSD bullish scenario is playing out as 5 waves up are visible from 1.3392. The period of softeness from 1.3552 is most likely a second wave pullback and Fibonacci support rests between 1.3453 and 1.3491 (38.2%-61.8% of 1.3392-1.3552). We are looking to align with the uptrend at 1.3475 (previous 4th wave low). We?ll reiterate what we have for the past few weeks - be careful trading from the long side as the sentiment backdrop gives scope to a larger reversal. Since price pattern (the 3 wave drop from 1.3680 is the dominant pattern and is bullish) has yet to confirm such a reversal, so it is wise to remain bullish.
Strategy: Aligning with uptrend at 1.3475, against 1.3391, targeting above 1.3680.

Commentary: We are bearish on the USDJPY and price action is telling us that that we are correct in our position. The clear break of the trendline drawn off of the 4/19 and 5/11 lows and a 5 wave decline from 122.13 gives scope to more losses. The entire rally from 115.14 may be a double zigzag (W-X-Y - shown on the last few day?s charts) as well. Any rally should unfold correctively (3 waves) and resistance should be strong near 121.46 (prior 4th wave high). We view this as an opportunity to get aggressively bearish.
Strategy: Bearish at 121.40, against 122.40, target TBD

Commentary: Similar to the EURUSD, Cable continues to exhibit impulsive characteristics to the upside. A 3 wave correction is unfolding from 1.9964 and is most likely a small 4th wave (see labels above). Support should be strong near 1.9898, after which a thrust to a new high is the favored view (in a small 5th wave) to complete a larger 3rd wave. Watch out for round number resistance at 2.0000 as well as the 161.8% extension of 1.9676-1.9898/1.9732 at 2.0091. The bullish view is favored above 1.9816 (5/31 high and wave i of 3 high).
Strategy: Bullish now, against 1.9676, targeting 2.0131

Commentary: Trendline resistance (drawn off of the October 2006 and January 2007 highs) has capped gains just above 1.2300. With shorter term trendline support failing to hold yesterday, it is likely that the USDCHF is headed lower. Coming under 1.2197 bolsters this view. Ultimately, we are looking for a test of 1.1877.
Strategy: Bearish at 1.2196, against 1.2328, targeting 1.1877

Commentary: The USDCAD continues to drop below every measured objective for the end of large larger wave 3. Still, the next few weeks should see the USDCAD consolidate / pullback towards 1.0849/1.1036 (23.6% - 38.2% of 1.1825-1.0548) in wave 4 before wave 5 drops to a new low. We?ll watch the form of the correction that unfolds so that we can align with wave 5 lower. As soon as we see impulsive upside action, we?ll commentate on short term bullish opportunities. For now, it looks like 1.0574 should remain intact until at least a test of the 100% extension of 1.0548-1.0636/1.0574 at 1.0661. Reward to risk is poor here and we do not see this as an opportunity (chart above is 15 minute).
Strategy: None

Commentary: With 5 waves higher from .8162, risk has shifted to the downside and a test of former 4th wave support at .8354 is in order. A deeper correction is possible and we?ll have to watch the form of the correction, which should last at least a few days, before making a stand. We?ve been bullish since .8216 and are moving to the sidelines now.
Strategy: None

Commentary: Kiwi is in the same position as the AUDUSD. That is, 5 waves up from .7237 leave the NZDUSD vulnerable to a corrective move lower. Given that this could be the end of a much larger 5 wave rally (from .5927), a very sizeable correction and reversal opportunity is at the forefront. In fact, the decline from .7552 looks impulsive. We are willing to get bearish now, against .7552, with a target TBD. Any retracement is an opportunity to align for a reversal. .7518, .7533, and .7544 are potential resistance.
Strategy: Bearish now, against .7552, target TBD