The dollar rally to this point has been impressive. A continuation of the rally is expected.
We turned bearish at 1.57 yesterday, mentioning that the drop from 1.5944 was awfully deep for a correction. Although 1.5611 has been the bullish ‘line in the sand’, the alternate count treated the advance from 1.5283 as a B wave flat and the drop from 1.6039 is wave C of the flat and will not end until below 1.5283. Additionally, if we are correct in our flipping to bearish, then the strongest part of the decline should be upon us and price should remain below 1.58. For the first time in a long time, bulls are on the defensive.
Visit our recently updated Euro Currency Room for specific resources geared towards this currency.
STRATEGY: Bearish, against 1.5797, target below 1.5283
Preferred count: The advance from 95.72 is wave W in a W-X-Y complex correction and the drop from 108.57-103.76 is wave X. Wave Y is underway towards 116 (equality with wave W). Alternate: price action from 108.57 is forming a triangle in wave X. The best strategy is to play a bullish break.
Visit our recently updated Yen Currency Room for specific resources geared towards this currency.
The GBPUSD tested and held the trendline drawn off of the 6/13, 7/7, and 7/8 lows. Still, it is likely that wave D of the triangle is underway towards 1.9550/1.96. This is our stance as long as price is below 2.0075.
Visit our recently updated British Pound Currency Room for specific resources geared towards this currency.
A major reason that we have switched to a generally USD bullish bias is the USDCHF. The pair has broken above a channel that has held since early May. Under this count, the 3 wave rally from .9647 was wave W in a complex correction. The choppy decline from above 1.06 serves as wave X and wave Y is underway now. Expect the advance to reach 1.10 (former 4th wave).
The USDCAD continues to advance off of what we perceive to be the wave E low at .9974. Expectations are for a bullish break above 1.0378 in the next few weeks. We’ll discuss objectives when warranted. Price ideally remains above 1.0077.
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency
STRATEGY: Bullish, against .9818, target above 1.0378
Kiwi is a bit ahead of the AUDUSD in terms of its longer term structure. The decline is clearly more mature but still has a ways to go. The break of .7445 signals makes it likely that price will remain below .7761 going forward. Watch the longer term trendline drawn off the June 2006 and August 2007 lows. This level should provide at least interim support.
Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com
