Prices extended higher, but contrary to many people’s view, the euro isn’t out of the woods. In fact, we see prices vulnerable to a reversal. Given the ECB’s absurd corporate debt QE program, and its floundering economies, we think the euro will soon top. Despite our view that the Fed isn’t going to be hiking rates, at least it has stopped executing the “monetary madness” that other central banks are pursuing (BOJ, SNB & ECB).
Prices have been unable to hold above the 1.1500 area since 2014, and we see substantial resistance at that level. A push above the internal trendline drawn off the April and August ’15 lows, however, would mean that both our top and alternate counts are off base. That doesn’t mean the euro is headed for 1.3000 though, just that we’re not seeing a triangle up from the March ’15 low.
We’ve reverted back to our view that GBPUSD is going to see fresh lows. Why? First, while we did see a bullish divergence into the late-February low, it came from Sustainable Bear territory (lower grey RSI zone). Since prices bottomed, GBPUSD still hasn’t registered a Sustainable Bull reading (upper blue RSI zone). So, our RSI study is resolutely bearish. Next, prices are still below both the down trendline from the wave ((B)) high in August, along with the internal trendline drawn off the wave (1) and 1 lows. Lastly, we can’t count the action up from the low as an impulse, and we’re still below the wave ((A)) lows back in April. We’re going to be looking at bearish GBPUSD positions on strength into trendline resistance, or on a break of the 1.4057 low.
Here too, we’ve revamped our count to longer term bearish, despite nailing the idea of a corrective wave (iv) and rally in (v). Now that we’ve reached the previous fourth wave, and longer term down trendline resistance (not shown, .7977 this month) we’re looking for a top of some significance. We’re allowing for another push higher, possibly lasting another week or so, but we believe that the .8000 area will prove too much to overcome. Bulls should tread lightly into the rally.
Here too, we’re longer term bearish, but NZDUSD may outperform for another month before it tops. Perhaps this speaks to additional upside elsewhere against the dollar, but we doubt it. No Sustainable Bull, Sustainable Bear (and no divergence) from the low, along with a choppy rally, all speak to a upward correction – not a new bull. Substantial resistance exists in the .70-.7150 range, and we don’t see prices pushing through that zone.
We still don’t have five up from the low, but it’s looking like wave A may have finally bottomed. A push above down trendline resistance will confirm this idea, and that the 1.2900 level is strong support. It has proved a significant level for prices since back at the wave (3) high (and wave 4 of (5) low). Many traders may attempt to play further breakdown on a new low for the move, but we’ll be aggressive buyers should that occur (pending an hourly reversal and follow through bar, of course). Keep an eye on USDCAD this week.
Tuesday’s bearish engulfing pattern keeps the bears in control. When bearish bars form at resistance in larger downtrends (or bullish bars at support in larger uptrends) it’s best to pay attention to the signals. In this case, it seems likely that prices are going to form five waves down for wave 5, rather than the abbreviated decline in mid-March. Also, notice that RSI failed to push above the 50 level, which keeps the pressure on the downside per the Sustainable Bear readings earlier this year. We’ve labeled that low as wave (i) of 5, and the bounce (ii) of 5, but it’s possible wave 4 formed as an expanded, running flat (per the alternate label). Either way, we’re looking for a new low and five waves down into mid-April. It’ll take a bounce back above 113.80 to alter our view.
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.