Elliott Waves Suggest Japanese Trouble

EURUSD

EURUSD
Consolidation Means Continuation

The euro has been consolidating for over a year now, but it’s gained almost no ground. Without something impulsive to the upside, we can still assume parity is coming eventually. The action up from the wave (D) low is choppy and overlapped, and prices found resistance at the broken up trendline. It’ll take a push above 1.1400 in an impulsive manner to suggest higher prices are coming. Until then, we’ll expect one final push to the upside, unless the wave .iv low is broken first.

GBPUSD

GBPUSD
Consolidation Means….

Here too, GBPUSD has been trading essentially sideways since the day after the Brexit vote. This appears to be a consolidation below resistance from the wave (3) low. It’ll take a push above that level to suggest a larger low was struck than we have currently assumed. Until then, allow for one small wave higher unless the 8/30 low is taken out. Notice that RSI hasn’t achieved a Sustainable Bull reading in either EURUSD or GBPUSD.

AUDUSD

Aussie Finds Resistance, Again
Aussie Finds Resistance, Again

Here too, despite a rally from below .7200 since May, we don’t have anything impulsive to the upside. There was a brief Sustainable Bull reading back in January, but the trend has moved sideways since. In addition, Friday’s break dropped below the red up trendline, and it’s possible that wave 3 to the downside is about to begin. We remain bearish in the bigger picture, and see an asymmetric outcome to the downside as long as the wave (ii) high is intact.

NZDUSD

NZDUSD
Kiwi is Above Resistance

Despite the choppy nature of the rally, the fact that NZDUSD has pushed past .7300 resistance means the benefit of doubt has to be to the upside. That goes against our top count, but the second Sustainable Bull reading casts doubt into it. Certainly wave Z is small relative to W and Y in both price and time, so wave (c) of Z of (X) may be in its infancy. We will assume further upside here as long as the wave (b) low isn’t taken out. Given the backdrop elsewhere, we aren’t excited to play this bullishly, but perhaps it serves as a warning to our other counts, or at least suggests to favor Kiwi’s crosses.

USDCAD

USDCAD
The Range Continues

I’m not going to waste any words talking about the ugliest chart in the group. The range continues, and even if our top count is correct, it remains a sell rallies and buy dips range. Sometimes, a trader’s best course of action is to know when to take none – this applies to USDCAD.

USDJPY

USDJPY
One More Diverging New Low

We’ve nailed the dollar/yen call for the sharp rally for wave (b) which failed right where it was supposed to, the red down trendline. Notice that RSI didn’t register a Sustainable Bear reading (lower grey zone) into the wave (a) low, but it also didn’t register a Sustainable Bull reading (upper blue zone) into the 9/2 top. So, while the wave (b) rally looks impulsive, we’ll retain our call for one final drop into a bottom to complete wave II.

After which, we expect something very bad to happen in Japan. At the very least a significant monetary event, and at worst something even more destructive. While the Keynesian/Monetarist cult is beginning to lose a bit of its luster globally (How much more QE, and deficit spending would prime the pump when we’ve seen $4T & $8T just in the US in the last eight years?) we don’t expect Japan to admit defeat in its 20+ year battle with a slumping economy. Note we don’t say battle with deflation, as even in Japan, there’s been no deflation, even if there hasn’t been significant inflation. We’d advise steering clear of ALL Japanese assets.

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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