-Prepare for EURUSD and AUDUSD bullish breaks
-GBPUSD and NZDUSD not as clear technicalls
-Position for large USDCAD decline
EURO / US DOLLAR
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| Classical Outlook: The break above falling channel support off of the 1.3740 highs is concerning for bears but the market has failed to show any good follow through thus far. After breaking out on Wednesday, gains extended to 1.3390 Thursday before pulling back into the 1.3200’s. This could now set up the potential for a false upside break and once again put pressure on the downside. However, we recommend taking to the sidelines at current levels, with a break back above 1.3390 or below 1.3195 required for clearer directional bias. Above 1.3390 exposes 1.3585-1.3740 while below 1.3195 opens a move back to 1.3000. |
| Elliott Wave Outlook: The push above channel resistance suggests a rally through 1.3742 and possibly as high as 1.4150-1.4200 (61.8% of decline from 1.4723 and 100% extension of 1.2510-1.3742). Staying above 1.2965 keeps this outlook intact and there is short term Fibonacci support at 1.3125. A dip to this level would warrant bullish action. Note: exit remaining shorts at week’s open. |
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BRITISH POUND / US DOLLAR
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| Classical Outlook: No reason to be taking positions at current levels with the market caught in the middle of a very choppy range. Our bias however is for an eventual resumption of the broader downtrend to be confirmed on a break back below 1.4395 which should then open a fresh downside extension exposing next key support by 1.4110 (30Mar low). Any rallies should be well capped ahead of 1.5000 with only a sustained break back above 1.5070 required to shift outlook. |
| Elliott Wave Outlook: Structure is not clear near term but a larger advance seems likely prior to the next leg lower. Staying above 1.4396 keeps bulls in control and Cable on a path towards 1.5728 (200 day SMA near there as well). A drop beneath 1.4702 could complete a short term correction early next week. |
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AUSTRALIAN DOLLAR / US DOLLAR
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| Classical Outlook: The market continues to chop around within a very broad 0.6000-0.7400 range dating back to October 2008. Despite the recent strength and break to fresh 2009 highs, the overall structure remains grossly bearish and given the proximity to the range highs, we like the idea of looking for opportunities to be short in anticipation of retest of the range lows at minimum. A break back below 0.7000 should help to accelerate declines and confirm bearish resumption. |
| Elliott Wave Outlook: The correction from the October low is still underway. The AUDUSD has broken through the 200 day SMA and is at its highest level since early October. Short term support is .7140-.7186. The rally from .6953 is wave v of C and an objective is .7630 (which is where wave v of C would equal wave i of C). This is close to the 50% of the decline from .9822. |
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NEW ZEALAND DOLLAR / US DOLLAR
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| Classical Outlook: The market continues to consolidate the latest setbacks off of the 0.5985 April highs with the daily chart potentially attempting to carve out a head & shoulders-like topping formation. A break below neckline support in the 0.5500 area would be required to confirm and accelerate declines back down to a measured move objective by 0.5000. However, at current levels, no positions are recommended with the market just as easily seen rallying back to the 0.6035 2009 highs from January. |
| Elliott Wave Outlook: The head and shoulders ‘look’ is still there but the decline from .5987 is in 3 waves, which warns of additional upside potential. Signals are mixed. |
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US DOLLAR / JAPANESE YEN
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| Classical Outlook: Continues its impressive rally from the Ichimoku cloud top and is in the process of retracing the latest 101.45-95.60 move. The market has broken back above the 61.8% retrace and now eyes a break back above 100.00. Key levels to watch over the coming sessions come in by 100.00 and 98.50 respectively. A break above 100.00 will open a move back to the 101.45, 2009 highs, while back under 98.50 sets ups a bearish reversal targeting 95.60. |
| Elliott Wave Outlook: The long term trend remains down and I expect a resumption of that trend although there is near term upside potential. There is potential resistance at 99.72 (March 5 and April 17 highs). Until there are short term signs of weakness, it is dangerous to be short the USDJPY. Exceeding 101.50 would signal the likelihood of additional gains towards 105.00. |
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US DOLLAR / CANADIAN DOLLAR
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| Classical Outlook: Has pulled back quite sharply over the past several days with the market breaking to fresh multi-day lows below 1.1980 to finally break the 200-Day SMA by 1.1850. While the current pullback changes the picture somewhat, the broader structure still remains constructive with the market locked in a longer-term bullish consolidation dating back to October of 2008. As such, any dips towards the bottom of the range should be used as opportunities to establish long positions in anticipation of a move back into the mid-range at a minimum. |
| Elliott Wave Outlook: A larger USDCAD decline is underway towards 1.1359 and perhaps even lower. Weakness, which is accelerating, strongly suggests that 5 waves from .9055 are complete at 1.3068. 1.2055 is short term resistance. |
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US DOLLAR / SWISS FRANC
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| Classical Outlook: The 200-Day SMA is the key here with the market remaining quite constructive while the pair holds above the longer-term moving average on a close basis. Recent attempts below the moving average have failed and we are once again bouncing to suggest fresh upside. Look for a break back above 1.1445 to take pressure off of the downside and accelerate gains towards 1.1600. A close below the 200-Day SMA at 1.1370 will be bearish and open a direct test of the 1.1165 19Mar lows. |
| Elliott Wave Outlook: The USDCHF decline is likely to extend. 1.0925 is the 61.8% of the advance from 1.0367 and potential support. Staying below 1.1606 keeps the pair on a path lower. Short term resistance is at 1.1450/75. |
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EURO / JAPANESE YEN
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| Classical Outlook: Has been quite constructive of late with the market in the process of retracing the major 137.45-124.40 move to reach the 61.8% fib in the mid-132.00’s thus far. Daily studies still show room for additional upside from here and the risks are for a move back towards the 78.6% retrace in the 135.00 before considering a bearish reversal. In the interim, setbacks are seen supported ahead of 130.00, with a break below required to shift focus back on the downside. |
| Elliott Wave Outlook: 5 waves down from 137.46 is bearish and suggests that the long term trend is down. However, the decline could be wave C of an expanded flat. Neither count is favored over the other at this point. |
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EURO / BRITISH POUND
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| Classical Outlook: While our overall bias is for a much lower cross rate over the coming months, price action at current levels does not warrant any sell recommendations. The market seems content on chopping around for the time being before considering a more significant move. Rallies back above the 100-Day SMA towards the 0.9150-0.9200 area should not be ruled out and we will look to sell on an approach to this level. Back under 0.8785 is required to open fresh drop. |
| Elliott Wave Outlook: I wrote last week that “it is best to wait for completion of the drop from .9507 and subsequent correction prior to going short against .9507. This process should take at least a few weeks to play out.” There is Fibonacci resistance at .9224. A rally to there may complete a small second wave in an impulse from .9507, which is the bearish line in the sand. |
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EURO / CANADIAN DOLLAR
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| Classical Outlook: While there is still room for some additional weakness, potentially back to the 1.5500 area, we do not expect to see setbacks extend much further with the broader structure still showing mildly constructive. As such, we recommend looking to establish long positions on dips towards 1.5500 over the coming sessions in anticipation of a more significant rally back into the 1.6500 area. Daily studies are approaching oversold which helps to reaffirm near-term basing prospects. |
| Elliott Wave Outlook: The decline from 1.6983 is not a correction at all but rather a C wave impulse that will end beneath 1.5633. A drop below there would expose Fibonacci support at 1.5359. Only a rally above 1.6204 would suggest upside potential. |
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TRADE LIST
*Entry prices for trades that are recommended ‘at market’ are listed as the close price on the date published.
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