The USD rallied overnight but evidence is mounting that a dollar weakness is around the corner.
The drop below 1.4815 confirms that wave 4 was complete. What is most important here is that the drop below 1.4815 completes 5 waves from 1.6039. When wave 5 completes, a multi week rally (perhaps more) will take place. Objectives for the end of the decline are 100% of wave 1 (1.6039-1.5521) and 61.8% of wave 1; the calculations produce 1.4431 and 1.4673. 1.4668 is the 38.2% of 1.2482-1.6018 as well.
The USDJPY short term pattern is non existent (there is no recognizable pattern). In such situations, we look to the long term structure for guidance. Big picture, a 12 year triangle may be complete at 124.13. The decline from there to 95.72 would be wave 1 down of the 5 wave thrust from the triangle. Wave 2 (correction) has been underway from 95.72. Bottom line…look for a top.
Last night, we wrote that “wave 5 is considered underway from 1.8786 (as long as price is below there). The GPBUSD objectives for the end of wave 5 are at 1.8532 and 1.8375. A significant low could form near one of these levels.” Cable has rallied strongly from the morning low of 1.8512. A low may be in place. Look for support near 1.86.
The USDCHF has reached 1.0986 (the 100% extension of .9647-1.0624/1.0010). A short term resistance line continues to hold so we are looking for weakness. 1.0820 would be initial support.
Bigger picture, we are looking for a top. The recent advance was a break from a triangle. Triangles occur as the middle wave of 3 wave corrections. So, if we are correct in our labeling above, the USDCAD should form a top soon…1.08 is the 61.8% of the 1.1875-.9055 decline and a potential resistance area.
The 4th wave that was expected appears to be complete at .8795. Expect a new low, below .8591, before a more significant low forms. The psychological .85 level is potential support.
As long as price is below .7057, our preferred count is that a 5th wave is underway that will come under .6824. The March 2007 and August 2007 lows at .6719 and .6639 are potential support as is weekly S2 at .6768.
Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com