Only brief comments tonight. EURUSD has run into resistance three times now post-Brexit. The sideways consolidation likely means continuation, which in this case is lower, and perhaps sharply so. A break of the up trendline cements Thursday’s high as critical resistance. Until then, further sideways action could develop. It would take a push above the down trendline to suggest something less ominous.
Our work continues to suggest GBPUSD will head below 1.2800 before its decline is complete. That said, we can’t rule out further sideways corrective action, potentially lasting months first. It seems that 1.4000 will prove almost impossible to overcome, though, with a combination of 50% retracement of the Brexit drop and structural resistance surrounding the wave (3) low. Continued Sustainable Bear readings on RSI post-Brexit day supports our conclusion.
AUDUSD has pushed higher, yet the action is unimpressive. It’s choppy, overlapped, and does the push up from the wave (b) low look impulsive, like a third wave should to the upside? No. In addition to be a choppy mess up from (b) (likely an ending diagonal for wave (c) of 2), the bearish divergence on RSI is potentially telling. That said, we’re going to need to see clear impulsive action down, and a corrective bounce (ideally below the red up trendline too) before getting aggressive.
The last year has likely been one big corrective wedge. The failure at the upper channel line of wave Y, after a clear five waves up for wave (c) of Y spells near term trouble for Kiwi. Perhaps it’ll manage another stab higher like AUDUSD, but we wouldn’t be looking to play that. Instead, look for a corrective rally to develop, likely after lower prices to start the week. Notice the bearish divergence on RSI into last week’s top, just like Aussie. Look for some troubling news Down Under, or from the commodity space (or perhaps something USD bullish – gasp).
We’re going to spend little time on USDCAD because the range continues, and we see little reason to try to force anything.
We’re open to a bottom having formed and a major new bull market in wave III, that will eventually target 150.00-175.00 on its way to financial disaster for Japan (including inconvertability). Look, Japan can’t repay its debts, so it’ll default, via directly, through a BOJ write-off or inflation via the printing press. That’s why we’ve been warning of a major bottom, and though it’s too early to say for sure, we’ve got impulsive action up. Of course, that could be an expanded flat for wave 4, rather than the end of wave (5)’s ending diagonal. A push beyond the red down trendline, and support above it will mean the end of the decline, and upside fireworks to come over the next couple of years.
The main thing that gives us pause is the Sustainable Bear on RSI into the low. But, keep in mind that only means an 87% likelihood of a new low, it’s not 100%.
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.