- EURUSD bottom in ahead of 1.25
- USDJPY breaks January high
- GBPUSD cautiously bullish
- USDCHF ending diagonal complete
- AUDUSD and NZDUSD hold support
Finally, the EURUSD appears to have put in a solid bottom. After weeks of brutal choppy action in what was a triangle, the EURUSD broke lower. However, triangles lead to terminal thrusts. In other words, moves from triangles complete a larger move in that same direction. In this case, the break below 1.27 completed 5 waves down from 1.4723. A corrective advance over the next month (at least) is expected. Initial resistance is not until 1.33 (former chart resistance and 38.2% of decline from 1.4723). Support begins at 1.2740.
It seems likely that a flat is unfolding from the December low at 87.09. The advance from 87.09 and decline from 94.67 are in 3 waves. Waves a and b of flats are 3 wave affairs. Wave c of a flat is an impulse (5 waves) and resistance is at the 38.2% of 110.71-87.09 at 95.45 as well as the 50% at 98.19.
The GBPUSD is in no man's land between 1.4990 and 1.4090. Based on the EURUSD count, which is much more clear, strength seems more probable at this point. If the path of least resistance is higher, then price should remain above 1.4361.
I wrote Friday that “this advance is nearing completion in an ending diagonal from 1.1312. Watch the upper end of the diagonal line for resistance. The line crosses roughly 1.1920 today and increases about 20 pips per day.” The USDCHF fell just short of the upper diagonal line but the sharp reversal is strong evidence that the advance is complete. The USDCHF is expected to reach at least 1.13. Short term resistance begins extends to former support at 1.17.
As I've favored the last few weeks, the triangle that has been underway since October is probably complete at 1.2020. The breakout scenario is favored as long as price is above 1.2278. Coming under there would require a reassessment of the short term pattern.
I am zooming out to the daily in order to highlight the long term bearish implications from the 5 wave drop and subsequent 3 wave rally (since July 2008). The corrective rally from the October 2008 low ended right at the former 4th wave, which is typical of corrections. The pattern since the October low can also be categorized as a head and shoulders continuation. Coming under the February 2 low at .6245 would mark a break of the neckline and focus would then shift to the October low of .60. A word of warning to bears though, staying above .6245 keeps the larger range intact and there is risk of a rally that exceeds .6857 prior to resumption of the downtrend.
The NZDUSD has declined impulsively (5 waves) since its 2008 high and that decline was followed by a 3 wave rally (from the November low). The drop from .6090 is viewed as beginning of the next bear leg. Price may exceed .5454 in order to complete a corrective advance from below .50 prior to resumption of the larger bear trend.
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