Friday’s big rally leaves a little bit of doubt about the “consolidation below support” comments. However, prices are still below a broken up trendline and a down trendline, so bulls will need to overcome those to disprove our bearish view. Should prices break above both, we won’t fight any further progress, as that will leave three waves down from what we thought was the wave (E) high. Still, it doesn’t mean EURUSD is immediately headed much higher, instead, this long sideways correction just isn’t complete yet.
Many people have mused about Brexit, but they haven’t answered this question, “Does Brexit mean a weak pound due to the BOE’s ability to print, or a stronger pound because it avoids the ECB’s likely printing and euro breakup?” Perhaps the answer is both, because by the look of things GBPUSD is much weaker than EURUSD of late. Last week’s rally is barely noticeable on the chart and RSI is still languishing. Allow for a rally this week, but the next big move is likely down. That sounds familiar, right?!!!
While we prefer the bearish count, we’re not going to fight higher prices either. RSI found support at 50 a couple of times and prices found a support shelf. Until that gives way, we’re going to have to let prices do what they want to – not that we had any other choice, really. Keep in mind that the five wave rally for C of (B) could be accounted for in a more bullish manner, and that includes a push towards .8200 or so prior to the big downside resumption. I find it difficult to believe we’ll do that, but it’s an option.
Here too, we like the bearish count as an analyst, but as a trader, we’re not going to fight higher prices. Notice that prices found resistance at the red line many times, and now that has become support. We’re going to need to see a break of the up trendline before we get excited about risking capital to the short side.
We’ve been disinterested in USDCAD for weeks, and that’s primarily because The Wolf is a position/swing trader who likes to ride trends. As such, range bound markets are the antithesis of what I like to see. Is wave X ongoing, or was the rally up from the first X a bigger (b) wave? Frankly, I’m not going to spend too much time trying to figure it out. In time it’ll become clear, so let’s just be patient with it.
Similar to kiwi, notice how USDJPY found resistance at the conjunction of the two red lines, one down trendline and one structural resistance from the wave 1 low. We’re bearish until the red down trendline is broken, although we’d assume the decline will get more choppy into the low. Allow for an early week bounce, and if it’s big enough, we’ll be looking to get aggressively bearish.
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.