US Dollar Decline Viewed as Deep Correction of Young Bull

• Euro Deep Second Wave Correction

• Japanese Yen Correcting in Large Second Wave

• British Pound Same as Euro

• Swiss Franc Bear (USDCHF Bull) Is Here to Stay 

• Canadian Dollar Brutal Price Action

• Australian Dollar Bearish Below .8993

• New Zealand Dollar Expanded Flat?

Commentary:  The EURUSD decline looks like a clear 5 wave affair, therefore we are treating 1.4349 as a significant top.  The advance has unfolded in a corrective manner as well, probably a double zigzag.  The rally has stalled at the 61.8% of the 1.4349-1.4125 at 1.4364 and the 78.6% is potential resistance at  1.4301.  We advocate an aggressive bearish stance against 1.4349.  As the decline unfolds, we will be better able to determine bearish targets.   

Strategy:  Bearish now, against 1.4349, target TBD (below 1.4125) 

Commentary:  We wrote yesterday that “it is possible to count 5 waves down from 117.93 so a larger correction is due unless the decline is extending.  Under the extension scenario, 114.59 is the 100% of 113.24-114.32/113.51 and a rally to there would potentially complete a correction.  This level is also just above the gap open from this weekend.  If a larger correction is playing out, then look for resistance at 115.02 (38.2% of 117.93-113.24).”  The larger correction appears to be unfolding, so look for resistance closer to the confluence of the former 4th wave / 50 % retrace level of 117.93-113.24 at 115.58/72.  The 61.8% at 116.14 is also a potential end point for this rally.  Once we see evidence of a top, we will be getting aggressively bearish (and we’ll let you know here). 

Strategy: Flat

Commentary: Cable has been treacherous lately, with the break above 2.0494 proving temporary and with yesterday’s decline almost fully retraced.  The rally to this point has stalled at the 78.6% of 2.0547-2.0258 and a second wave rally could be nearing completion (also in a double zigzag….like the EURUSD rally).  A bearish bias is warranted against 2.0547.  The next leg lower could be vicious.    

Strategy: Bearish now, against 2.0547, target TBD (below 2.0258)

Commentary:  We maintain that the drop below 1.1623 completed 5 waves down from 1.2468 and that a large rally is underway.  Potential support is at the 61.8% of 1.1599-1.1785 at 1.1670.  A rally through 1.1785 instills confidence in the larger bullish outlook.

Strategy:  Bullish, against 1.1599, target TBD

Commentary: The USDCAD turn yesterday appears to have been a fakeout as all of yesterday’s gains were completely reversed.  Once thing that has led us to suspect that a larger turn is due is COT positioning.  The difference between speculative and commercial positioning is the largest that it has ever been (specs are long CAD and commercials short CAD).  This sentiment extreme is often a strong indication that a turn will occur soon.  Of course, sentiment extremes can last for some time so until we see evidence of a bottom, we will refrain from taking action in the USDCAD.  The count above shows a possible diagonal in the iii of v position.  This is against Elliott’s rules but rules are made to be broken.     

Strategy: Flat

Commentary:  There are two counts that we are tracking.  One has a 3 wave correction ending at .8750 and the other has a series of 1st and 2nd waves unfolding from .9077.  In the former scenario, price will exceed .9077 before a larger correction.  In the latter scenario, this rally will reverse before .8993 and a larger decline will take place.  We are favoring the bearish count due to the weight of evidence that calls for a dollar bottom.     

Strategy: Remain bearish, move risk to .8993 (from .9077), target .8580

Commentary:  Kiwi is in a similar position to the AUDUSD.  We maintain that the .7785-.7394 decline was an impulse.  This means that at least one more leg lower will take place.  The up, down, up scenario that has unfolded since .7394 looks like an a-b-c expanded flat correction.  The correction may be complete at .7569 since exceeding .7556 satisfies minimum expectations.  See our special report from Friday at NZDUSD Top.

Strategy:  Get bearish now, against .7785, targets TBD