Commodity Currencies Suggest US Dollar’s Run Ending

EURUSD

EURUSD Daily chart
Weakness Ahead

We’re still sticking with the view that EURUSD is in a fourth wave. It appears to be unfolding as a triangle with wave (e) either complete, or nearly so. Notice that RSI has dropped below 50, and with prices below critical resistance, there’s not really a reason to fight lower prices. A trendline drawn off the wave ((B)) high (not shown) still has prices in a downtrend, and that’s our view. Keep in mind that on a push above the wave (c) high, we’ll turn neutral, rather than bullish, as that likely means more sideways action will unfold before new lows.

GBPUSD

GBPUSD daily chart
A Temporary Bounce

The massacre for the pound continued over the past couple of weeks, and we’ve seen a very clear impulse wave down for wave (3). We have lowered critical resistance to the wave (1), but prices shouldn’t be anywhere near that. Ideal resistance is the 38.2% retracement, although given the small wave (2) bounce, we could see something a bit sharper. Regardless, the larger trend is still down.

AUDUSD

AUDUSD daily chart
Sentiment Will Be Awful After Another New Low

After dipping to new lows, AUDUSD has recovered. But, we see this as a flat correction for wave iv, with another new low to come. We had RSI register a Sustainable Bear reading, which has us looking for another diverging new low. Should prices push up beyond the wave i of (v) low, then we’ll assume an expanded flat correction for wave (iv) is still underway. We’re looking for a bearish reversal to get aggressive.

NZDUSD

NZDUSD daily chart
Another New Low to Come

The sharp, impulsive nature of the decline from the .6930 area, after a corrective looking bounce, leaves us looking to be able to count an impulsive decline to complete the move. Yet another Sustainable Bear reading suggests any bounce will be completely retraced here too. It’ll take a push back above the wave (iv) high to suggest something else is underway.

USDCAD

USDCAD daily chart
A Classic Blowoff & Reversal

The CAD has been the weakest of the majors, but that may be about to change. We can count five waves up at several degres, and there’s almost no CAD bulls (USDCAD bears) out there anymore. But we do have a weekly key reversal which is a new high for the week, but a lower close. In addition, we can count an impulsive decline, so next up is a small corrective bounce. Or, perhaps a deeper upward correction that will fail to register a Sustainable Bull reading, which would turn the tide.

There’s potential for prices to return to the previous fourth wave, yet still be in a longer term bull market. Given the extent of the rally, we wouldn’t be surprised to see a sharp downward move, regardless of what oil does. Many seem to be bearish the loonie because of weak commodity prices, but the BOC failed to lower rates, perhaps because the price of fresh food is through the roof in Canada.

USDJPY

USDJPY daily chart
Finds Support

We can count five waves down from the wave (B) high, prices found support at the extreme of the prior fourth wave low, and we saw a weekly key reversal. That means a new low for the move, but a higher close. We should expect a bounce to correct the five waves down at the very least. RSI registered Sustainable Bear into the low, but it was diverging into the wave 5 low.

Happy Trading!

The Wolf

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.

About The Wolf

Twenty years is a long time to be involved in the trading business. Through many battles in every asset class known to man, knowledge has been gained; and, this project is a way to share that knowledge.
The Wolf is a big fan of repeatable market work, or the creation of a “process.”

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