Dollar Rallies Big; Euro Tests Major Support

The EURUSD has held above 1.53 (to this point), but the critical level is 1.5283. A drop below there would shift focus to 1.51; which is a Fibonacci extension.

EUR/USD

The drop below 1.5364 negates the short term bullish bias. The preferred count that calls for strength for current levels is intact as long as price is above 1.5283. A drop below there indicates that a C wave is underway towards 1.5108 (100% ext. of wave A from 1.6018) or even 1.4653 (161.8% ext.). The pattern should resolve itself in the next day or two.

USD/JPY

“The USDJPY rally has gone through 107.20 so we need to look at other counts. One decline treats the drop from 124.13-95.72 as a W-X-Y decline (7 waves, which is corrective). However, it is not clear where this fits in the larger pattern (take a look at the monthly, and it is quite clear that the USDJPY has broken from a 4th wave bearish triangle). The other count is that the decline from 124.13 is a leading diagonal. In Elliott Wave Principle, it is stated that second waves following a leading diagonal often retrace 78.6% of the diagonal. Therefore, both counts suggest strength until 113/118 (roughly the 61.8% to 78.6%). The next short term move could be down in a b wave though (assuming that the advance from 95.72 is wave a). This sets up a near term bearish stance, then probably a flip to bullish in a few months for wave c.” Short term, the pair should encounter resistance from the confluence of the 200 day SMA and 2/14 high at 108.59. A short trade will probably be triggered in the next few days.

GBP/USD

We maintain that either a flat or triangle is unfolding. “Since 1.9337 (the 1/22 low), the GBPUSD is tracing out either a flat or a triangle as large wave B within an A-B-C correction from 2.1160.” In the case of a flat, Cable could drop below 1.9337 before rallying in wave C. If a triangle is unfolding, then 1.9364 will hold. Keep these levels in mind if you are trading the GBPUSD.

USD/CHF

“There is little doubt that the advance from .9647 is corrective because a triangle separates the two legs. The only question is whether or not the rally from .9647 is a complete 3 wave rally or just the first wave of a larger more complex correction.” Today's high is above 1.0527, which clouds the short term picture. We need to wait for clarity before committing to a bias. Ideally, the next idea comes from the bearish side given the 3 wave advance from .9647.

USD/CAD

The minimum objective that we have cited for some time is above 1.0324. However, the alternate (in red) commands a good deal of respect. In the case of the triangle, the rally from .9818 would be wave D of the triangle to be followed by wave E lower that ends near .98/99 and then a bullish breakout. A push through 1.0322 could complete wave 1 of 3 of C as well. In other words, regardless of the pattern (up in wave C now or after wave E of a triangle), the rally in wave C is not going to be a straight shot from here.

STRATEGY: Bullish, against .9967, target above 1.0324 (but lighten up on longs ahead of 1.0324 resistance)

AUD/USD

The AUDUSD has fallen below the trendline that had held since late January but there is no sign of a reversal as the decline still counts better as a correction. “The rally from .8952 is wave C of a large 5th wave diagonal that could extend to a measured objective just below 1.00 in coming weeks (.9936).” Not until we see a 5 down or a drop below .9273 would we consider adopting a bearish bias. Sings of strength ahead of .9273 would prompt a trade from the long side.

NZD/USD

This is the long term count that we have been following (short term is not clear). The implications are that the NZDUSD has just entered a large C wave decline that will eventually come under .5927. The problem is that the decline since .8215 does not look impulsive. 1st waves often are tricky to count so it is possible. We'll look for opportunities to sell below .7921 in the weeks ahead.

DailyFX

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