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The Top Ideas report released at the beginning of every week includes TREND analysis and SENTIMENT analysis.  The STRATEGY table is updated everyday as risk and target levels change. 

A triangle as a 4th wave may be complete at the 2/7 low of 1.4438.  Expectations are for a bullish breakout that in the coming weeks that completes wave 5 within the 5 wave advance from 1.3261.  

Visit our recently updated Euro Currency Room for specific resources geared towards this currency.

We wrote yesterday that “there is the possibility that a rally through 1.4757 would complete 5 waves up from 1.4438 and give way to another correction.  However, it is also possible that the EURUSD is subdividing higher in a larger 3rd wave.  With this in mind, the best strategy is to keep moving the stop up.”  The short term supporting trendline will remain intact if the rally from 1.4438 is the 5th wave that we think it is.  We are presenting our revised bull count today that treats the rally from 1.4614 as a third wave.  An objective is at 1.5126 (161.8% extension).

Longer term, we maintain that a 12 year triangle ended at 124.13 in June 2007 and that the USDJPY is headed lower for a test of its 1995 low at 81.12.  Since 124.13, the USDJPY has traced out a series of 1st and 2nd waves.  The decline should accelerate in the next month or so in wave 3 of 3.  This forecast remains intact as long as price is below 114.65.  Resistance should be strong near 110.00 (Fibo and congestion). 

Visit our recently updated Yen Currency Room for specific resources geared towards this currency.

We still maintain that the USDJPY is still working higher, possibly towards 110.00 (Fibo and congestion).  The drop below 107.21 negated our previous count but price could be putting in an important bottom just below 107.00.  Price is supported by a trendline drawn off of the 1/23 and 2/4 lows.  The decline from 108.35 consists of 2 equal legs as well (a common trait for a correction).

For the first time in months, the GBPUSD daily count is clear.  The pair has declined in 5 waves from 2.1160, indicating that a significant top is in place.  The 5 wave decline is viewed as either wave 1 in a 5 wave bear cycle or wave A in a 3 wave bear cycle.  In other words, longer term bearish potential is great.  The rally underway now is either wave 2 or B and we will look for a top in the 2.0033-2.0463 zone.  This corrective rally probably lasts for weeks if not most of this month.  Also, the GBPUSD rallied for 5 consecutive days ending Thursday.  A string of consecutive days usually occurs in the beginning or middle of a strong rally.  In this case, it is likely the beginning of wave C. 

Visit our recently updated British Pound Currency Room for specific resources geared towards this currency. 

It does remain our contention though that the GBPUSD is headed much higher (above 1.9957) over the next month or so; but probably not before a corrective drop in a second wave that reaches at least 1.9560 (38.2% of 1.9361-1.9687).  This is a former congestion area as well.  As the correction unfolds, we will be better able to determine when exactly we should enter long.

A corrective 4th wave rally may be underway now within the 5 wave decline from the October 2006 high at 1.2768.  The USDCHF will likely trade in a choppy manner for the next month or so, but with an upside

bias before a decline in a 5th wave completes the entire decline from the October 2006 high and gives way to a multi-year low.

For the first time in months, we are taking a strong directional stand on the USDCHF.  “It is possible to count 5 wave up from 1.0728 to 1.1103.  An a-b-c decline to 1.0885 could be the first wave in a complex correction (W-X-Y).  Wave X then is underway now and is taking the form of a triangle.  A thrust lower (below 1.0885) would complete wave Y and larger wave B, which would set the stage for a C wave rally into 1.12/13.”  That C wave rally may in its early stages now.  Support should be strong near 1.0800/26 (Fibo levels) if price does slip lower still.

 The pattern in the USDCAD since the November low at .9055 is either an A-B-C rally that will lead to a new low (under .9055) or a 1-2 (expanded flat) base that will lead to a strong rally to new highs (suggesting that a multi-year USDCAD low is in place).  Either way, price will come below .9755.  Potential support from Fibonacci is at .9652 and .9511. 

Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency.

No change to the call for a lower USDCAD.  “The rally from .9871 could reverse near the 61.8% at 1.0184 or the 78.6% at 1.0269.  One reason that we are confident in the bearish case against 1.0378 is that the rally from .9871 to 1.0124 was in 3 waves, which is countertrend.”  The reversal occurred at 1.0197 and it is probable that the USDCAD downtrend is back underway.     

As long as the AUDUSD rallies in 5 waves and declines in 3 waves, there is no reason to adopt a bearish outlook.  The rally from .8512 is expected to exceed .9400 in the coming weeks.  Objectives are near 1.00.

It could be that a 5 wave rally from .8874 is complete.  This would be wave 1 within a 5 wave advance that ultimately tests parity.  As long as price is above .9166, then the AUDUSD could subdivide higher.  But with corrections expected in the GBPUSD and EURUSD and with it looking like the USDJPY is putting some sort of a bottom, we think it best to exit the AUDUSD long for now.  We will look to get back in near .9111.

The drop on 1/22 to .7383 completed a large correction that had been underway since November.  Like the AUDUSD, the NZDUSD trend remains up and an upside breakout will probably lead to a test of the July 2007 high at .8108.

 Similarly with NZDUSD, a 5 wave advance appears complete at .8074.  Like the AUDUSD, this is probably a wave 1 rally that kicks off a larger 5 wave advance.  Expectations are for a corrective drop to end near .7913 (former 4th wave extreme and 61.8% of .7814-.8074).

 Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com

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 throughtout the week; these are published at separate articles at DailyFX. 

ELLIOTT WAVE VIEW is our assessment of both the longer term (DAILY BARS) and shorter term (60 MINUTE BARS) EW structure.  This is the basis for our STRATEGY.

STRATEGY: EXIT