FX Weekly Report

Many USD pairs are showing sings of potential retreat from their long term trends. Evidence is mounting but of course, nothing is ever absolute. Let’s see if this week brings follow through on the turn or yet another new low on the USD.

USD Index – The most obvious support now lies at 74.78, whereas the resistance is now 76.81

EUR/USD – The last swing high did not actually break the trend high so anything is still possible here

GBP/USD – There is still a key upward trend-line in place

USD/JPY – Price action still mid-channel. Bias is difficult to assess

USD/CHF – A revisit of Par (1.000) is not out of the question, however the downward pressure seems to be waning.

USD/CAD – The Dollar/Loonie price action is stuck between two descending trend-lines. They form potential support and resistance trigger points

AUD/USD – This pair’s volatility has jumped in the last week or so – This often signals a break. the question is which way. The long term trend-line has yet to fail

NZD/USD – This is one pair that has broken its long term trend-line. However it is now threatening a break back above the resistance

EUR/JPY – This pair is stuck in the middle of its range – Bias is very difficult here

Long term trends by their nature don’t turn easily. The last two weeks we have seen counter trends and we have reversed to about half of the original gain by the USD. There are many arguments to be made for both a weak and/or a strong Dollar going forward.

What I do know is that this trend has lasted surprisingly long and should at least correct in a reasonable period of time.

USD Index- The bottom is not assured yet and the risk to both directions is about equal. What I would say is a new low will likely be reversed quite rapidly and any break above 77.00 should accelerate.

EUR/USD – Below 1.4626 pretty much defines the trend. New highs would likely reverse in short order.

GBP/USD – A double top is a real possibility

USD/JPY – I have no directional bias

USD/CHF – A double bottom at 1.00 is not out of the question. On the upside look for a break above the wick at 1.0337

AUD/USD – Another long term trend that just won’t fall

NZD/USD – This pair shows some evidence of having topped

USD/CAD – Will the break-out get legs and continue?

EUR/JPY – Tough call but I still think a new top is possible

The markets are definitely moving towards a break-out or reversal as daily volatility has returned. As the long-term trend has been quite one-sided it stands to reason that this could signal a larger reverse.

I will caution that there is always a chance the trend will end with a bang and a further push to new highs and lows on some currencies pairs is possible. The other consideration of course is that a strong pull back in wave 2 on the Index is also a possibility. However I think the bottom line is to look for further USD strength in the bigger picture.

USD Index – Looks impulsive – A three wave pull back and continuation would bolster the Bullish USD view

EUR/USD – The long term trend-line is at risk – A bounce or new high is possible but I believe the upside is limited

GBP/USD – A new high or drop have about equal weight possibility on this pair. Of course the downside level to watch is 1.5706

USD/JPY – Yen strength and Dollar strength correlate when risk aversion is the theme. The move up looks corrective so downside is possible mid-term

USD/CHF – I’m not sure what the sort-term EW count is, However 1.0287 could be the key level

USD/CAD – Friday’s closing price of 1.0818, is a key pivot point the this pair

AUD/USD – Like the EUR/USD, a top is not guaranteed but a new top should signal a new drop

NZD/USD – This pair should bounce but further drops would be expected

EUR/JPY – Key levels are 1.40 and 1.30

This may be a USD bottom but I am still using caution until we see more evidence a turn has started in earnest.

USD Index – The trend is still intact. 75.00 may prove to be the psychological barrier however a true break has not yet occurred.

EUR/USD – I am still cautious due to the nature of the pull back from the top of 1.5059. The shape is not what I would like to see from an Elliott Wave view. However I have been wrong before about initial wave structures and I still see the upside as limited. So I am about 50/50 on this pair as to whether the top is in place.

GBP/USD – The move down from the the top on this pair is clearly impulsive. However the structure preceding it could be evidence that it is a wave C of a correction. What I would really like to see before calling a top is a 3 Wave pull-back and further drop to new lows. Whereas a new high would once again put 1.70 back in the picture.

USD/JPY – Reaching overbought at this point. Direction unclear to me.

USD/CHF – Clearly the downside is limited. Whether the bottom is truly in place or not remains to be seen.

AUD/USD – As with many pairs the upside appears limited but not guaranteed.

NZD/USD – As with the AUD/USD, a correction is overdue. Where is the top?

USD/CAD – Current trend-line could define the trend

EUR/JPY – In the bigger view I think this should top out and drop again.

Price action slammed into the downward trend-line and did not follow through.

Could be another bottom yet to come on the index?

The Dollar Index on the 1 hour chart has a downward channel that may be failing

Look to break the trend-line around 75.60 for a potential change in trend.

In Elliott Wave terms the channel may be an ending diagonal.

I don’t think there is much downside left on the USD but the price action is still not clearly Bullish USD. My view is that although more correction may take place however until we clearly change direction in a big way it is tough to call a Dollar Bottom.

USD Index – May be forming an ending diagonal

EUR/USD – Not a clear candle pattern – Risk is however to the downside – Any new highs should be considered as a sell opportunity

GBP/USD – Correction is due and it could be strong, but there appears to be 5 clear waves up which could mean following the correction a return to the old tops is still a possibility.

USD/JPY -Direction unclear but the last daily candle is suggesting a bearish move on the chart

USD/CHF – Further correction is possible and any new lows should be bought

AUD/USD – Somewhat overbought

NZD/USD – Not sure if top is in place

USD/CAD – The price action up is choppy so it may not be turning just yet

EUR/JPY – Correction due however not quite overbought

Last week the dollar gained as the week ended with a significant move back to the resisting trend-line on the USD Index. I would say that price action above 77.45 is what could signal a change in trend. So expect further dollar strength in the next day or two and longer term if the price breaks out above 77.45.

USD Index – Bottoming

EUR/USD – Follow through to the downside is expected

GBP/USD – Some follow through tot the downside is expected

USD/JPY – Bullish engulfing candle would suggest follow through to the upside of this chart

USD/CHF – Neutral to bullish

AUD/USD – Highly overbought

NZD/USD – Bearish follow through expected

USD/CAD – Bottoming/bottomed?

EUR/JPY – Tough call as EURO should weaken some and JPY is a safety currency. However candle pattern suggests upside on this chart. – Neutral to short term bullish

Last week we saw continued USD strength albeit choppy at times and not all currencies saw big moves. The GBP was one currency that held up fairly well for the week.

What happens this week could determine the overall long-term trend. At this point it looks like the week could start with Dollar weakness. There is still a lack of evidence that suggests a run towards the USD is underway, so use caution and look more for range trading rather than break-outs.

USD Index – Will the break-out follow through?

EUR/USD – Retracement or reversal?

GBP/USD – Lack of follow through to the downside could produce strong upside

USD/JPY – Could be bottoming

USD/CHF – Long term trend-line still intact

AUD/USD – Final thrust?

USD/CAD – New low coming?

NZD/USD – New high possible?

EUR/JPY – Low rejected?

I’m not convinced quite yet that the Dollars gains are going to hold without at least a strong pull-back or even new tops and bottoms on many currency pairs.

The USD Index itself has yet to cross over its long-term trend-line started back in March and the current move of dollar strength has yet to display real signs of impulsive characteristics.

When I teach Elliott Wave, I always stress the following: The most important thing to remember when trying to determine the general direction using EW methods is to try and recognize if the current move is “Corrective” or “Impulsive” in nature. At the same time one must consider that initial moves in trend opposing direction often take on the subtle look of a correction move but give way to impulsive action. So, what is most required at these moments is patients.

What I also do at these junctures is look at patterns I do think I can identify well. In this case the GBP/USD is displaying in a fashion that is is still suggestive of a correction. I was viewing the current move as a triangle and although it did break the lower up-trend line, I still see a series of ABC’s in the channel and this could be telling of a double zigzag correction.

So, until there are more indications overall of a greater move towards USD strength, I remain willing to believe the trend is not quite ready to give way. So I view the market as in the process of turning but not necessarily around the corner yet!

USDIdex – Trend-line not yet breached

EUR/USD – Not a convincing turn yet

GBP/USD – Corrective or impulsive?

USD/JPY – Correction coming due?

USD/CHF – Not a convincing reversal

AUD/USD – Topping but still unconvincing

NDZ/USD – Same as AUD/USD – In topping process but not yet really on its way

USD/CAD – Trend-line broken but look not yet quite impulsive

EUR/JPY – Rounded top still in play