We’re still bearish, looking for an expanded flat to unfold for wave (ii). Ideally, prices will remain below the down trendline to keep our count firmly on track. Obviously, we have event risk this week with the Brexit vote happening on Thursday. We might have a sleepy week until then, and then strong whipsaws late week. It’s not an ideal scenario for traders with stops.
We still like a bearish resolution, but we do need to be aware of the alternate which suggests continued action before wave (4) completes as a flat or triangle. Like we said, the market has event risk, and options.
We still like a bearish outcome, but will it happen from higher levels? The action after retesting the broken down trendline looks like a classic retest. Sometimes, the best action, is in-action. We’ll stand aside on a firm opinion until the picture becomes clear.
The last week’s action is a little messy, so without a clear five down, we’ll stick to the “higher into a top call,” especially after the Sustainable Bull reading on the daily view. A break of the lower channel line would cast doubt on that call, though. And, keep in mind that the larger degree bar chart (weekly bar) is expecting a new low. That’s not to say we’ll get one 100% of the time, but more like 87%, which put odds at like 6-to-1 in favor of a new low. Considering we don’t have a clear five up from the low, we’re anticipating lower prices to come. You can’t bet the farm on it, though, because, it just doesn’t always work.
USDCAD ended a very significant trending phase in January, on the back of $26 oil, and fears of a global deflationary collapse. Since then, oil has doubled and commodities are the best performing asset class in 2016. So, we’re going to suggest that after a very significant trend ended, we’re now going to see an extended period of non-trending. In other words, we’re going with the idea that wave (x) has bottomed in a larger B wave. A push past the down trendline would put that idea on solid footing, while a break of the (x) wave low would mean wave C down is underway.
We can’t believe that people really want to own the yen. But, that’s where the market is at right now. A low should form at some point on USDJPY, and the next move higher will be more dramatic than the decline over the past six months has been. But, USDJPY hasn’t bottomed yet. And, if the Sustainable Bear readings on both the daily and weekly charts are to be believed, then a real, lasting bottom is going to be some time in the not too near future. So, allow the decline to develop.
One could have made the case that USDCAD should have topped near 1.4000, but yet the rally continued for another 700 pips. Of course, four months later it was at 1.2500. The same is likely going to be seen here in reverse. A bottom should form near current levels, but instead, prices may see 100.00 first. Four months from now, though, we could be seeing new highs near 125.00 in the beginnings of wave III. Be patient bulls, but don’t forget about this.
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.