Euro May Enter Fastest Part of Decline

The EURUSD has stalled at a resistance line and is at a point in the wave structure where probability of an acceleration lower is high.

EUR/USD

As stated yesterday, we are bearish as long as price is below 1.5594 (red line). An unexpected move above there would cause us to reassess the situation. As it stands now though, we are treating the decline from 1.6018 as a series of 1st and 2nd waves (or A-B-1 and 2 of C). Price has stalled at a trendline this morning and the rally from 1.5283 is in 3 waves to this point.

STRATEGY: Bearish, against 1.5594, targets at 1.5050 and below 1.50

USD/JPY

The USDJPY decline is taking on an impulsive look as the drop from 105.59 is extended and probably a small 3rd wave. A top would be confirmed if the decline evolves into a 5. Still, we are short based on the structure of the rally from 95.72. Previous commentary mentioned that, “the structure of the rally from 95.72 is evidence that the larger trend remains down. The advance consists of overlapping waves and can be counted as a double zigzag (W-X-Y); which is two 3 wave segments connected by an X wave.” Risk should still be at 105.60 although it is unlikely that price comes near that level.

STRATEGY: Bearish, against 105.60, target TBD

GBP/USD

Over the last 2 months, the pair has gone sideways and it is more likely that this serves to build a bullish base that will lead to a rally through 2.04 in wave Y of a large W-X-Y complex correction. The decline could still be an X wave but price remaining below the trendline keeps the trend bearish. That and the bearish count for the EURUSD favor the downside for the GBPUSD. Potential resistance is at 1.9620 and the trend is considered bearish as long as price is below 1.9909. In summary, it is best to stand aside right now until a clear opportunity emerges.

USD/CHF

The USDCHF pattern is unfolding as expected. We wrote yesterday that “we favor the upside but not before a drop into the 1.0325/50 area. The decline to this level would complete a 4th wave within the advance from .9887 and give way to a rally through 1.06 and maybe into 1.10.” The decline has materialized and has reached the former 4th wave (congestion). The 38.2% at 1.0332 should provide strong support.

USD/CAD

It is time to turn bullish the USDCAD again. The circled area on the chart is the advance from .9997, which is in 5 waves (view the rally on a 60 or 15 minute chart to view the rally in detail). This development is evidence that the drop to .9997 completed wave Y as a truncation. As such, a bullish bias is warranted against .9997. The minimum objective is above 1.0324.

STRATEGY: Bullish, against .9997, target above 1.0324

AUD/USD

With 5 waves down from .9541 and a 3 wave rally potentially complete at .9506, at least one more bear leg is expected for the AUDUSD. The minimum objective is below .9290 and risk is at .9506. This is roughly a 1:1 reward/risk ratio at the current juncture but if the decline does materialize, there is the possibility that it extends whereas risk is set at .9506.

STRATEGY: Bearish, against .9506, target below .9290

NZD/USD

We are showing a very short term chart this morning for timing purposes. We have focused on the bigger picture recently and expect a major decline in the coming weeks and months. Although the major top is probably in place at .8215, the fastest part of the decline is probably about to begin.

STRATEGY: Bearish, against .7747, target TBD

DailyFX

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