We didn’t mention the wave ((X)) triangle possibility last week, and considering the three wave nature of both the wave (A) and (B) waves, it’s a solid alternate. We do like the idea of the flat more, mainly because there’s no “policy divergence” coming from the Fed, but notice how prices have run into a broken trendline resistance. Should we see prices back below the short term up trendline, and certainly the wave 1 high, that’ll be the best count.
Notice that the action to the upside has been much less subdued in GBPUSD. It remains far below the wave (1) high, and since the rally up from the low is corrective, we’re sticking with the larger bearish view. But, we’re going to need to see evidence of a turn back down prior to getting aggressive here. Allow for some strength next week prior to the resumption of the larger down trend. Of course, if prices breach the wave (1) low, we’ll have to move to either the alternate on last week’s chart, or something more similar to EURUSD’s flat/triangle.
Aussie remains below near term down trendline resistance, and RSI registered a Sustainable Bear reading into the low, which is the reason we say it’s a 50/50 call between the bullish and bearish views. While prices are below the down trendline and the high from 2/4 bears are still in control, but above there, and we’ll need to consider the larger pattern complete.
Here too, prices are still below some key resistance levels, but not by much. Strength above recent highs will breach the down trendline and allow for prices to rally further, even if we’re not sure exactly the count. Remember, counts are only important when they give us clues as to a probable next move. When unsure of a count, place more emphasis on other technical tools, and shorter term candle action. A break of the down trendline would leave us with no interest in fighting higher prices.
Prices didn’t give us much clarity this week, and it seems that the wave ii high is the key to USDCAD’s next move. RSI didn’t register a Sustainable Bear reading, which means that RSI still suggests another new high is probable. But, with the blow-off action we’ve seen since May of last year, we do need to see a push past the wave ii high before we can get on board taking risk on a move higher.
One could make the case that wave 3 needs one more new low before it’s complete, but in such a violent decline, the 250 pip bounce argues that 4 is underway. Either way, prices should remain beneath the wave 1 low, and only a move above that would suggest something less bearish is developing. Considering Japan is monetizing $66 B USD per month, and they seem unlikely to give up on its monetary madness, we still don’t like the idea of being long yen.
The Wolf is traveling next weekend, so our next update will be in two weeks.
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.