bio2

Violent intraday swings in the majors hasn't done much to clarify the bigger picture for most pairs.  The exception is the EURUSD, which is nearing the intial bullish target we set out a few days ago.  A strong Yen also commands attention (major reversal?).

We wrote yesterday morning that “bottom line is that there is enough evidence to warrant a bullish bias against 1.4631.  Resistance a few days out is 1.4980 (former resistance), 1.5080 (former resistance), and 1.5170 (38.2 Fibonacci).”  Price action is confirming our bullish bias to this point BUT be careful because the advance from 1.4630 is in 3 waves so far.  In order for us to remain bullish, price must remain above 1.4672.   

Price dropped below 108.36, which makes it possible that the entire rally from 95.72 is complete.  The rally from 95.72 is in 3 waves (W-X-Y), which is corrective and the sharp reversal warrants attention.  It is worth mentioning as well that the rally from 95.72 retraced 50% of the decline from 124.13.

Although a low appears to be in place (at least temporarily) for the EURUSD, the GBPUSD is vulnerable to a new low (as long as price is below 1.8720) from a 5th wave thrust from a bearish triangle (wave 4) before a more permanent low is in place.

The USDCHF is testing the confluence of the 38.2% of 1.3284-.9647 / former resistance.  The area should provide some opposition to additional gains.  Near term, a head and shoulders top may be forming (look on the 60 minute).  A drop below 1.0895 would confirm this reversal pattern and likely lead to a drop to initial support near 1.0750.

The drop below 1.0543 does not change the corrective nature of the decline from 1.0726.  All the moves are in 3 waves - therefore the USDCAD is most likely bottoming very soon in a complex 4th wave.  As such, expectations are for a new high (above 1.0726) to complete the advance from .9974.  Longer term objectives are at 1.08 (61.8% of the 1.1875-.9055 decline).  Look for a top and reversal near there.

The AUDUSD is testing the limit of its triangle but the pattern is still valid.  We expect a new low (below .8591) before a more permanent low forms.  The AUDUSD is in the exact same spot as the GBPUSD.  That is, the recent consolidation is a 4th wave triangle.  The 2008 low to this point is .8512 (1/22 low) and reinforces the psychological .85 level as potential support. 

The rally from .6824 is likely wave A of an A-B-C correction.  Wave A is taking the form of a diagonal (leading).  The next move should be lower in a B wave to at least .7038.

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