Euro Will Likely Form a Low in Next Few Days

The EURUSD is consolidating above 1.58 but a drop below there is probable today or early next week before a tradeable low is in place. 1.5611 remains the bullish 'line in the sand'.

There is little new to add regarding EURUSD structure. The weight of evidence continues to favor bulls. Our preferred count treats the consolidation from 1.6018 to the end of June as a triangle in the wave IV position (within the 5 wave advance from 1.1640). From the 6/23 low on 1.5468, the EURUSD has rallied impulsively, declined correctively, rallied impulsively, and is currently declining (correctively to this point). The drop from 1.6039 is viewed as wave ii of 3. Look for support near 1.57 today or early next week. We are bullish against 1.5611.

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

STRATEGY: Bullish, against 1.5611, targets 1.6325 and above

The USDJPY decline from 107.75 could be the beginning of a 3rd wave within the decline from 108.57. Bigger picture, the advance from 95.72 is in 3 waves (A-B-C). Wave C is nearly 61.8% of wave A, a common relationship. The pair has broken the support line shown above and held below the 200 day SMA. We wrote yesterday to “look for resistance as high as 106.75/107.00; the former trendline and a congestion zone.” The USDJPY spiked into 107 yesterday and is pressuring the figure again this morning. If the bearish bias is to prove correct, then price needs to fall before 107.75.

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

STRATEGY: Bearish, against 107.75, targets 101.97 and below

Wave C of a triangle may be complete at 2.0156 and wave D could be underway now. However, we favor the count that treats the advance from 1.9364 as wave C of a flat, which will not end until above 2.04. The red line on this chart is the 200 day SMA, which the GBPUSD is holding above. Keep risk at 1.9810 and look for support in the 1.9884-1.9925 zone.

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

STRATEGY: Bullish, against 1.9810, target TBD

The short term picture remains clouded. When in doubt, focus on facts. The facts are that the rally from .9647 is in 3 waves and that since early May the USDCHF has made a series of lower highs. This evidence is bearish. As long as price is below the most recent high (1.0352), a bearish bias is warranted. 1.0250 may provide resistance.

Wave E is still underway but is nearing an end. E waves (as we’ve written here often) are usually sharp and the decline has accelerated. In fact, do not be surprised to see a test of the lower triangle line near .99 before the USDCAD turns up. We’ll look to identify the bottom next week.

Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards this currency

The AUDUSD setback has reached and bounced from just above the 50% of .9475-.9849. The drop from .9849 is clearly in 3 waves (corrective) to this point; therefore evidence continues to support bulls. A cautious bullish bias is warranted against .9677.

The NZDUSD fell sharply yesterday but a drop below .7587 is required in order to make the decline from .7761 an impulse and suggest that the trend has turned back down. Until then, gains (albeit correctively) are still possible.

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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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