Support on AUD/USD still looks solid

Can you grade one level of support relative to another? Is a pause at a specific price point more important today than the same support level a month ago or 6 months ago? I think that there are ways to estimate one support level as more important than another. A good example is what is going on right now on the AUD/USD. Clearly we are at a long term support level having been here before in December and January during the last disruption in oil prices. However, what else is true is that we are at a level of extreme price movement based on a reading from the CCI or commodity channel index.

I use technical indicators like the CCI to grade support and resistance levels. When support coincides with a historically low level on the CCI where the market has reversed significantly before, I take note. That is the situation now. Support in the price action on the AUD/USD is occuring at the same time that we are clearing an extreme reading on the CCI. I have found that this is a good indicator that a continued trend is at risk and a bounce may occur.

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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.

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.

Visit our recently updated Euro Currency Room for specific resources geared towards this currency.

“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.

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