There was a short term break down on Thursday which looked like our top count from last week playing out. But, Friday’s reversal keeps the euro in a triangle, of a triangle, of a triangle, per our alternate count from last week. Unless prices push impulsively above the wave C high, we’re inclined to believe something ugly out of Europe is coming.
So, we’ve been bearish on GBPUSD for some time, and it hasn’t been because of Brexit. In fact, while new lows are still likely to be seen after wave ((4)) is complete, the wave ((5)) low will allow for a multi-year bounce. So, Brexit won’t be the pound’s undoing. In fact, while this hasn’t been the case yet, the euro is likely to under perform GBP going forward.
But, the Sustainable Bear reading on RSI means at least a retest of that low is coming. Look for the wave (3) low to provide substantial structural resistance.
No change from last week:
We can’t commit to the bearish case in Aussie, yet. Each time it has reached the mid-.77 area it has failed of late, and that happened this week, again. But, the action down from the suspected wave 2 high isn’t convincing as of yet, and as an astute reader points out on NZDUSD, we can’t rule out a push higher prior to a major top.
We’ve got a series of lower lows and lower highs, after a false breakout. NZD’s drop last week allows us to label another wave one and two of iii, which means we can drop key resistance for the count to .7311. Of course, prices should remain below trendline and structural resistance to keep the probabilities solid on our top count. No Sustainable Bear reading yet, and there’s still structural/trendline support around .7100, but we favor the bear case.
The strength in USDCAD, with a push above the recent range suggests our AUD & NZD counts are correct. However, we are nearing the 38.2% Fibo of the wave (A) decline, and we’re into previous fourth wave resistance. If the pair is going to fail, it should do so this week. A break of the up trendline is needed to suggest the wave (B) top is in place.
The yen is starting to wake up, and it pushed above the red down trendline. But, it was unable to remain above the internal line drawn off the wave ((A)) & wave (3) lows; and, it remains below the two red horizontal structural resistance lines. In other words, there’s still overhead resistance. Above there, though, we will switch to the alternate count and look to be short yen for the next decade or so – seriously.
When the next wave of yen weakness starts it’ll look like 2012-2015’s advance for USDJPY, except stronger. The yen will be in the 150.00-175.00 range before wave III to the upside is complete, and it’s possible that the yen inflation will spiral out of control.
Bonus Chart: JNK
It’s been a while since we’ve written about the Junk Bond Bubble, and it’s alive and well. Since the February low, high yield bonds are more in favor than ever, with some indexes hitting new highs, on the back of the collapse in the “risk-free” rates. We still think the bounce is wave (4) with new lows to come. But, we should recognize how the Junk Bond Bubble thesis could be correct, but off in the timing.
Should prices fail to decline from near current levels in an impulsive form, we’d have to think that the alternate count is correct. This suggests that the 2013 high was wave (A) of a triangle for wave ((B)), with the 2016 low being wave (B) of triangle ((B)). It still means a new low will eventually be achieved, but in a more sideways manner from here.
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.