Dollar Bear Trend Accelerates: Expect Continuation

The dollar bear trend has resumed as expected (although the short term USD rally that was expected was even shorter than was expected). The GBPUSD has satisfied minimum expectations by exceeding 1.9850 but expectations are for a test of 2.02 in the next 2 weeks. The EURUSD target is not until above 1.5843.

EUR/USD

We are still following the sam counts; two of which call for a rally through 1.5843. The EURUSD rally from 1.5303 is either a 3rd wave or a B wave (c of B). Risk can be moved to 1.5468. Look for support near 1.5630/40 (reaction low and Fibo).

STRATEGY: Bullish, against 1.5468, target above 1.5843

USD/JPY

Longer term, the advance from 95.72 is most likely corrective, but there appears to be additional upside potential over the next month or so. The first leg of the correction (95.72-105.70) consists of overlapping waves and is the first wave of a 3 wave sequence. The advance has formed a channel and the upper end of the channel is not until the 111/112 area. Also, the wave from 102.58 would equal the 95.72-105.70 advance at 112.62. Short term, a drop below 107.10 could lead to a test of the support line near 106.40 (reinforced by the 6/11 low at 106.56). A break of that trendline would give us reason to get bearish this pair.

GBP/USD

We were expecting a c wave to come under 1.9583 before the larger advance through 1.9850. The small c wave did not unfold but the larger bullish bias is correct as the GBPUSD rally has accelerated. The push through 1.9850 satisfies minimum expectations for wave c of the triangle but a more probable target for wave c of the triangle is 2.00/02. If a flat is unfolding, then Cable will exceed 2.04. In summary, remain bullish. Risk can be moved to 1.9583.

STRATEGY: Bullish, against 1.9583, target 1 at 2.0175, target 2 TBD

USD/CHF

We wrote yesterday that "the USDCHF remains stuck in a tight range, so a break in either direction is likely to be violent. The weight of evidence suggests that the break will be lower but the pattern is not especially clear." The break appears to be underway and it is down. We have reason to suspect that the USDCHF will head to a new low. The advance from .9647 is corrective because a triangle separates the two legs. 3 wave movements are always fully retraced (in the case of a triangle or flat, the full retracement is delayed). A bearish bias is warranted against 1.0493. Look for resistance near 1.0344 (short term Fibo).

STRATEGY: Get bearish, against 1.0345, against 1.0492, target below .9647

USD/CAD

There is no change to the USDCAD triangle scenario. A triangle is unfolding. Expect wave E of the triangle to end below 1.00. This decline will present a high reward/risk opportunity against .9818. A breakout in larger wave C towards 1.05/08 is expected to follow completion of the triangle.

STRATEGY: Bullish, against .9818, target above 1.0324 (but a test of 1.00 is probable in wave E of the triangle)

AUD/USD

The AUDUSD advance is tracking our preferred count, confirming that the decline from .9653 was corrective and that the pair is likely headed to a new high. In fact, the decline from .9563 is what we want to highlight. Since that drop is clearly in 3 waves, it is highly probable that the AUDUSD will head to a new high. We had thought that a correction would unfold as a small 2nd wave yesterday but that has yet to happen. If a correction does unfold, then take advantage. Look for support near .9492.

STRATEGY: Bullish, against .9327, target TBD (but a corrective decline would present an opportunity to add to longs/join the party)

NZD/USD

Bigger picture, the NZDUSD is expected to advance to the 50% of .7921-.7445 at .7683 and perhaps even the 61.8%-78.6% at .7740-.7920. A rally to there would fill the 6/4 gap. The up-down sequence from .7445 is probably waves A and B. Wave C is considered underway as long as price is above .7445. As such, a bullish bias is warranted against .7445 (for a push through .7646).

STRATEGY: Bullish, against .7445, target TBD

DailyFX

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