Fed Hiking in December Say the Elliott Waves

EURUSD

EURUSD daily chart
Decline Stops at Temporary Support, Expect Weakness

Prices didn’t rally in an impulsive manner up from the March low. As such, the larger trend is down. Since prices have now broken the up trendline, and RSI hit Sustainable Bear territory bulls have little in their favor. A bounce for (ii) is awfully small, but how much of a bounce do you wait for? A push above the broken red up trendline would mean a larger wave (ii) is underway. Otherwise, we should expect a new low directly, especially with a break of the 1.0800 level.

GBPUSD

GBPUSD daily chart
Bulls Get Skeward

Whatever reservations we had last week about the bearish outcome was removed last week. Not only did prices collapse through the up trendline, but they broke below a level of support around 1.5180. Similar to EURUSD, the bounce from the 2015 low was corrective, and there’s little reason to expect prices to bounce before dropping to a new low. Perhaps the Fed will raise rates in December, which will further constrict the global economy with a US dollar rally. If that happens, expect real pain to emerge in the emerging markets. Any bounce in GBPUSD that develops is a bearish opportunity.

AUDUSD

AUDUSD daily chart
Still only 3 waves up from the low

Prices failed to push above the longer term down trendline, and we still only have three waves up from the low. As such, it’s still too early to know that a low is in place, especially given the counts in the euro and pound. Maybe we’ll see a new low that is diverging in a bullish manner that will allow up to take some longer term bullish positions. A break of the red down trendline would suggest something less bearish was underway.

USDCAD

USDCAD daily chart
The Loonie Crumbles

The more I look at the USDCAD chart, the more I consider that the longer term trend is still up as well as the near term one. We can use the (ii) or (b) low as critical support, and think that prices are headed higher while they’re above that level. The wave 4 bottom, according to the alternate count, did occur right at support from the wave (3) top – a retest of the breakout. There’s no reason to fight the trend while we’re above the shorter term red up trendline.

USDJPY

USDJPY daily chart
Yen Collapsing

We hinted at it last week, when we suggested that perhaps we’re not bullish enough. In fact, we’ve moved the longer term count down as an alternate, because after reviewing the longer term charts, we’re likely not bullish enough. It’s possible that wave II is already complete, either at the August low, or earlier, and we’re looking at an extended wave to the upside. We’re not going to stand in the way of higher prices, for why should we be looking for one of the worst managed currencies in the world to rally?

We’re bullish against last week’s low, and it’s possible that we don’t see those levels for some time. Does anyone doubt that the BOJ, or the fools that run the Japanese government will allow a recession, or correction, to start there without literally dropping yen from helicopters? If we think the Fed is bad, and we most certainly do, the BOJ’s idiocy is unparalleled. Even if we get a “risk off” market, it seems the yen’s going to have a hard time bouncing.

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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