Near term, the EURUSD may be entering a small 3rd wave lower. This would be wave iii of 1 of C within the A-B-C decline from 1.5904. Coming below 1.5560 would inspire confidence in the bearish bias.
We showed this possibility yesterday on the forum. That is, the rally from 1.5342 could be an ending diagonal in the 5th wave position. Under this scenario, the EURUSD would spike through 1.5916 in wave v of the diagonal before reversing. Since wave iii of the diagonal is shorter than wave i, then we know that wave v can not exceed wave iii; which would place a top no higher than 1.6076. The diagonal is the alternate count though. The A-B-C correction (A down to 1.5342 and B up to 1.5916) is preferred. A break below 1.5670 would inspire confidence in this bearish scenario.
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STRATEGY: Bearish now, against 1.5916, target below 1.5342
We maintain that wave iv in the USDJPY could be complete at 102.95. We stress the qualifier ‘may’ because 4th waves usually end up a triangles or combinations, rather than zigzags. For example, the USDJPY could be in the early stages of a triangle. Even so, price would still come lower near term, probably below 98. In summary, remain bearish.
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STRATEGY: Bearish, against 102.93, target below 95.72
Concentration is on the daily because near term price action is choppy and unclear. The decline from 2.1160 to 1.9337 was in 5 waves and serves as wave A of the correction. A corrective rally to 2.0396 was wave B and wave C is underway now towards 1.85. Corrections often reach the 4th wave of one less degree. In this case, that level is 1.8515. Wave C would equal wave A at 1.8572 and the 61.8% of 1.7047-2.1160 is 1.8618. In other words, 1.85/1.86 has a bull’s eye on it. An alternate count counts the decline from 2.0396 as wave X in a larger upward complex correction from 1.9337. Under this scenario, the GBPUSD would exceed 2.0396 before falling hard in the larger C wave towards 1.85. Move risk to 1.9892
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STRATEGY: Bearish, against 1.9892, target 1.86
The rally from .9647 to 1.0249 is best counted as a double zigzag (7 waves), which either completes a correction or is the first leg in a more complex correction. Given the action (nothing impulsive) since the 1.0249 top, we favor the latter. Look for support at .9838 (100% of 1.0249-.9871/1.0216) and .9776 (78.6% of .9647-1.0249). A rally through 1.0089 warrants a bullish bias.
The latest bull leg (.9710-1.0324) is a wave 1 impulse within a 5 wave bull cycle (wave i of 1 is a diagonal). The drop to 1.0018 is wave 2 and wave 3 should be underway now; which will lead to a break above 1.0324 and much higher prices. Very near term, the break above 1.0223 suggests to us that the drop to 1.0132 was a small 2nd wave. Risk on longs can be moved to 1.0132
STRATEGY: Bullish, against 1.0132, target above 1.0324
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STRATEGY: Bearish, against .9307, target below .8952
Focus remains on the longer term count. We expect a significant decline, with price eventually coming under .5927. This decline could take up to a year or more though but could be in its early stages now (which is time to position for it). The decline into .5927 from .7463 and subsequent rally to .8215 are waves A and B of the large expanded flat correction that we believe is underway. Our best count has wave C underway now from .8215.
STRATEGY: Bearish on a break below .7781, against .8024, target TBD
Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com
[1] STRATEGY is a summary of our best technical ideas. The ideas are subjective and are subject to change everyday although trades are typically held for at least a few days and sometimes a few weeks or more. Ideas are also included for crosses throughout the week; these are published at separate articles at DailyFX.
