The dollar rally is viewed as corrective within the larger decline. Look for an to the USD rally near USDJPY 104.75, EURUSD 1.5075, and GBPUSD 1.9665.
There is no change to the EURUSD outlook from yesterday. “Wave 5 within the 5 wave rally from 1.4438 may be underway now. Wave 5 would equal wave 1 at 1.5391, not far from the mentioned objectives of 1.5429 and 1.5447. This is our favored count as long as price is above 1.5158. A drop below there means that wave 4 is still underway and is likely to test 1.5072 before wave 5 up begins.”
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The drop to 102.64 probably completed 5 waves down from 108.22. When wave 5 fails to register a new price extreme for the move (as happened here because the wave 3 low was 102.62), the 5th wave is termed ‘truncated’. Expectations are for this corrective rally from 102.64 to reach the 38.2% of 108.22-102.64 at 104.77 (former congestion as well) before the next bear leg begins.
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We were stopped out on the drop below 1.9811 (price nearly touched 1.97 this morning) but we remain bulls. The alternate count moves up to preferred status. We are counting the rally from 1.9361 to 1.9946 as 5 waves (truncated) and larger wave 1 of C from 1.9361. The current decline is wave 2 of C and it appears that a drop below 1.9719 is required in order to complete the corrective decline. The 1.9615-1.9707 zone is former congestion and a potential support zone. The 50% of 1.9361-1.9946 is in the middle of this zone, at 1.9653.
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STRATEGY: Look for longs in 1.9615-1.9707 zone, against 1.9361, target is probably near 2.04/05.
Similar to the USDJPY, we favor the idea that the USDCHF completed 5 waves down from 1.1033 but with a truncated 5th. As such, a larger correction is underway now as a 4th wave that should end in the 1.05/1.06 zone (23.6%-38.2% of 1.1033-1.0336).
The rally from .9710 could be counted as an impulse. As such, a bullish bias is warranted against .9710. Potential support begins at .9826. The next leg of the rally will be either wave 3 or C within the cycle from .9055. The rally will probably be strong. The goal for this week is to position for a big move higher.
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We view the decline from .9496 as wave 4 within the 5 wave advance from .8512. Price is expected to exceed .9496 in the next few weeks and possibly test parity before a major reversal occurs. Within the 5 wave rally from .8512, wave 1 is 588 pips, and wave 3 is 622 pips. Wave 5 could be extended or could be close to the lengths of wave 1 and 3. This places the end of the AUDUSD rally near at least .9800-.9900. Near term, look for support and an end to the wave 4 correction in the .9111/.9185 zone (50%-61.8% of wave 3).
STRATEGY: Look for longs in .9111/.9185 zone, against .8874, target TBD
The short term count in the NZDUSD is eluding us. There is potential support near .7900 from a line drawn off of reaction lows from 2/5 and 2/13. A drop to here could complete an a-b-c decline from .8213 and give way to a big rally. This would fit with the AUDUSD outlook.
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[1] 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 throughout the week; these are published at separate articles at DailyFX.