Dollar Shows Signs of Forming at least a Short Term Top

• euro / dollar move back to 1.35 expected
• British Pound bullish above 1.4350
• NZDUSD 5 waves down - corrective rally expected

EUR/USD

The decline from above 1.47 is wave (b) in what is either a triangle or flat that began at 1.2327. In either case, additional downside is expected as long as price is below 1.3802 (1/8 high). I am treating the decline from 1.4723 as a double zigzag (a-b-c-x-a-b-c) and the decline from 1.3802 is probably wave a of the second zigzag. As such, wave b should begin soon and initial resistance is just shy of 1.35. The alternate count treats the decline from 1.4723 as an impulse (5 waves). In this case, a corrective advance, potentially back to 1.38, would begin soon (since 5 waves appear complete). RSI is oversold and divergent on intraday charts, which favors a bottom near current levels.

USD/JPY

To review, the USDJPY rally failed just short of "the 61.8% of 1006.60-87.09 at 95.21. This is also the center of a former congestion zone (roughly 94-97) as well as the 100% extension of the rally from 87.09 to 91.31; at 94.08." The rally from 87.09 is in 3 waves, which is corrective. As such, a drop below 87.09 is expected. Near term, the decline from 94.67 appears impulsive and a small second wave corrective advance may be complete at 91.69. Staying below there keeps the bear count on track. A move above 91.69 would bring to the forefront the possibility that the corrective advance from 87.09 is not complete and that a complex correction (w-x-y) is underway that will end above 95.21.

GBP/USD

As long as 1.4347 is intact, there is potential for Cable to continue the advance from that level and exceed 1.5378 as part of a large correction of the entire drop from 2.1160. Recent COT data supports a bullish stance regarding the British Pound.

USD/CHF

The sharp drop from 1.23 is in 5 waves and probably wave A within an A-B-C correction that will end below 1.0367. The rally from 1.0367 is the B wave of that sequence and likely tests resistance from Fibonacci 1.15, eventually. Since the advance from 1.0861 is an impulse (5 waves), wave b is considered complete at 1.0861. Near term, it is unclear whether or not a small second wave is complete.

USD/CAD

Recent strength in the USDCAD suggests that a triangle is unfolding as wave 4. Triangles unfold in 5 waves (a-b-c-d-e) and wave d is underway now. There is potential resistance at 1.2520 and 1.2750 going forward. The best strategy is to wait for wave e to end before attempting a long position (may be at least a week).

AUD/USD

I wrote yesterday that "the AUDUSD has dropped below .67 and at least a corrective advance is due in what could be a small 4th wave. Initial resistance is at .6784." The high last night was at .6818 and the pair appears headed lower in a 5th wave that will end below .6574. A correction of the decline from .7275, potentially sharp, would then be expected.

NZD/USD

The NZDUSD decline is a bit more mature than the AUDUSD drop. The NZDUSD drop is already in 5 waves, so expect a bottom to form soon (today or tomorrow at latest) and for price to return to at least .5603 (former resistance).

DailyFX

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