EXPECTATIONS THIS WEEK: We maintain that recent dollar strength should be treated as a correction within the longer term bear and that the dollar downtrend is back on track. As the dollar downtrend continues for at least the next month, expect carry trade strength to return as the Yen and CHF also underperform.
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.
As long as price is above 1.4531, we will maintain a bullish bias. Remember, we think that a triangle is complete and that price will exceed 1.4967 in a 5th wave in the next few weeks. We do urge caution though at this juncture since the rally from 1.4438 did reverse at the 50% of 1.4953-1.4438.
STRATEGY: Bullish, against 1.4531, target mid 1.50s
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.
The USDJPY has traded in a choppy structure for over the last month. The drop from the 2/14 top was just in 3 waves, which supports the idea that the rally from 104.97 is not yet complete. Keep risk at 107.21 and try to get out near 110.00 (Fibo and conegestion).
STRATEGY: Bullish, against 107.21, target TBD
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.
Near term, the rally from 1.9386 is in 9 waves, which is an impulse and indicates that the trend is up. The quick drop to 1.9474 can be counted as a zigzag, which is a correction. Wave c of the zigzag equals wave a; a common relationship. Expectations are for price to exceed 1.9957 in the coming weeks in wave C within the A-B-C rally from 1.9337. This is a good opportunity to add to or initiate GBP longs.
STRATEGY: Bullish, against 1.9386, target above 1.9957
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.
We have been focusing on the idea that a triangle is unfolding in the USDCHF. However, we presented a bullish alternate count on Friday, but is now favored sue to the rally this morning. The advance from 1.0728 to 1.1103 is likely wave A within an A-B-C advance. The decline to 1.0885 is wave B and wave C is underway now towards the 1.1200 level. We will wait for 5 waves from 1.0885 to complete and then buy the corrective dip.
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.
The decline from 1.0378 is clearly a 5 wave decline and an a-b-c corrective rally could be done at 1.0128 -- very near the former 4th wave and 50% of 1.0378-.9872. If a larger upward correction is underway, then a test of the 61.8% at 1.0184 is possible. However, our stance is that the larger decline has resumed and that price is headed below .9755 is coming weeks. Near term, a spike through 1.0142 may be required before the bear leg accelerates.
STRATEGY: Bearish, against 1.0128, target below .9755
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.
The rally through .9100 confirms our bullish bias and instills confidence in a rally towards the mid .90s (at least). At this point, the most probable count is probably a series of 1st and 2nd waves since 1/22. This is a very bullish count and the AUDUSD could really accelerate now, especially since the pair has broken through .9100.
STRATEGY: Bullish, against .9004, target TBD
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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.
We were wrong in getting bearish last week since NZDUSD traded through our risk level. However, the pair continues to range and may be forming a triangle. Since triangles are continuation patterns, then we would expect the break to occur to the upside. However, it is unclear where a triangle would fit in the larger pattern. Also, the decline from .7966 to .7781 is in 5 waves and the rally from .7781 was an a-b-c rally with wave b as a triangle. The decline from .7956-.7814 is best counted as in 5 waves; and not having established a new low suggests that price will come under .7814 and then .7781 in coming days.
Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com [1] EXPECTATIONS THIS WEEK is a general forecast for the coming week. It is based on our across the board assessment of Elliott Wave patterns in the seven USD majors that we follow. [2] 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. [3] TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). Optimal entries, risk, and targets are based on traditional pivot formulas that calculate R3, R2, R1, P, S1, S2, and S3. These are objective measures and our subjective analysis (STRATEGY) may differ. [4] SENTIMENT ANALYSIS takes into account COT reports and analysis of news headlines. Studies done by Jamie Saettele (to be published in an upcoming book) indicate that the greatest number of headlines and the most negative headlines about a currency appear at bottoms and that the greatest number of headlines and the most positive headlines about a currency appear at tops. [5] 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.
Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com
[1] EXPECTATIONS THIS WEEK is a general forecast for the coming week. It is based on our across the board assessment of Elliott Wave patterns in the seven USD majors that we follow.
[2] 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.
[3] TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). Optimal entries, risk, and targets are based on traditional pivot formulas that calculate R3, R2, R1, P, S1, S2, and S3. These are objective measures and our subjective analysis (STRATEGY) may differ.
[4] SENTIMENT ANALYSIS takes into account COT reports and analysis of news headlines. Studies done by Jamie Saettele (to be published in an upcoming book) indicate that the greatest number of headlines and the most negative headlines about a currency appear at bottoms and that the greatest number of headlines and the most positive headlines about a currency appear at tops.
[5] 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.