Wolf’s Prey Elliott Wave Review

With the holiday weekend, I’ve been a little slow with the report. Let’s get right to the charts with our Elliott wave currency forecasts.

EURUSD

EURUSD daily chart
Unlikely that Support Will Hold

If the euro is going to find support, it should do it from just below current levels. The 1.1100 area has acted as support and resistance since back at the wave 3 low. The only reason we’re talking about support is the Sustainable Bull reading on daily RSI into the 1.1715 top. Elliott suggests the top is in and EURUSD is headed lower, but RSI isn’t confirming that. Nonetheless, we’ve identified critical resistance, and it’ll take a move above that to indicate our top Elliott count is off.

EURUSD 120-minute chart
Elliott Says Lower Directly

Here we can see that last week’s high failed below the wave .i low, which keeps us looking lower. A push above the wave .i low would suggest something less bearish is underway, perhaps another (X) wave. We see that as a significantly lower probability at the moment, though, and we’re aggressively bearish. We’ve been thinking that the Fed won’t raise rates and that economic weakness was going to be the reason for a larger euro rally versus the dollar. But, like we said last week, perhaps something very weak economically is going to take place in Greece, or another periphery country (Turkey?) which will cause turmoil in Europe. That’s our call while prices are below 1.1206.

GBPUSD

GBPUSD daily chart
Bears in Full Control

The rejection and lack of rally since the wave (C) high leaves the top count on solid footing. Notice the Sustainable Bear reading on RSI, and the sequence of bearish bodies on the candles for the past nine sessions. We can allow for a bounce, but should be sellers on it. It seems unlikely that prices will be able to muster much of a move back up, even though there should be a selling respite at some point.

GBPUSD 120-minute chart
1.5450 is Heavy Resistance

The shallow second wave is the bane of my existence as an Elliott based trader. Strongly trending markets just don’t want to let traders on board, and they seldom do. Notice that wave (ii) failed right near the extreme of the prior fourth wave, but it was minuscule. But, it was near structural resistance from the wave (c) and (B) lows over the summer. The 1.5300 should act as near term resistance as well which is the former wave C low from early July and the wave (i) low.

AUDUSD

AUDUSD daily chart
Nearing a Bottom

We say nearing a bottom, but notice the ease of Sustainable Bear reading on RSI (lower grey zone). The decline is nearing completion, but with no near term structural support, we can just allow prices to move lower until they signal at least a daily reversal bar. Even then, it’ll likely be a small fourth wave.

AUDUSD 120-minute chart
Expansion Target Reached, Likely Max Momentum

We wouldn’t be surprised to see a small wave iv bounce begin from very near current levels. Notice that prices have nearly reached the 100% expansion of the wave B correction.  Channel support sits just lower too, so it’s possible we see iv begin from above the .6800 area. I’m not interested in fighting the trend though, especially given the recent action. But, everyone knows about the commodity bust, and if the Fed isn’t going to raise rates, then maybe the USD’s rally will be short lived from here. Allow for a more choppy decline from here at least.

NZDUSD

NZDUSD daily chart
Lower Line is Support

It’s hard to get super bullish here, but if you were going to write a script for a bottom, it would start with bullish divergence, a completed count and god-awful sentiment. Check on all three. The only challenge is that it’s hard to call the action, “impulsive up, corrective down.” That said, a bullish reversal here shouldn’t be ignored. A push above the down trendline allows for a retest of the .7100 area at a minimum.

USDJPY

USDJPY daily chart
Not Bullish Action

Last week’s action was decidedly bearish. And, we couldn’t argue with a near term bearish stance versus 120.70. It’ll take a break of that level on the upside to conclude that wave (B) is still underway. Until then, we have to allow for the idea that wave (B) may have topped at the retest of the broken up trendline. Notice that RSU turned back down very near Sustainable Bear territory, which isn’t indicative of further upside corrective action. We’ve been anticipating a larger downside correction, since the impulsive rally up from the all-time low is fully formed for wave I. Many traders can’t conceive that 110 or 105 is even possible now, which makes it all the more likely that’s where we’re headed. We won’t ignore any bullish reversals, but we’ll need to see it first.

USDCAD

USDCAD daily chart
RSI Action Suggests Higher Still

Notice how RSI has repeatedly found support near the 50 level. That’s classic bull market action, which means wave 5 is still underway – likely in an ending diagonal. Expect one last push higher prior to a larger downward correction that could return to the 1.2000 level. Since we were expecting wave 4 to be sideways, an expanded flat for 4 is still on the table, especially since the action up from 1.2952 contains some overlap, although it would be of the 5-3-5-3-5 variety.

USDCAD 120-minute chart
More Upside to Come

We can clearly see the corrective action down from the wave (iii) high which does overlap the wave (i) high. Still, the ultimate resolution will be to the upside, and ideally a diverging new high from below Sustainable Bull territory on the daily chart will be in store. Until then, we can be bullish versus the wave (iv) low looking for a 100% expansion target. Anything short of that would likely mean a Terminal Set-Up for USDCAD.

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.”

One comment:

  1. Hey Wolf!

    Thx for the analysis.

    I’d like to make a comment on the Aussie. I have a thought for a while now, which I think it really should be taking into consideration, especially because its high probability. I think the Aussie is mostly likely won’t be making a DZZ pattern as your wave count shows. The price action has left the correction channel of a DZZ pattern a while ago, thus suggesting an impulse pattern is unfolding instead of a correction. The bearish slingshot on the RSI has nicely pushed the price below the lower channel line, turning the corrective channel into a base channel. The drop accelerated well and the ideal Fibonacci expansion level (1.618) for a wave 3 is already reached. The momentum on the monthly chart is the lowest since the top, while the weekly chart shows a small divergence in the sustainable bearish zone (the aussie is only nearing to the middle of a wave 3?). Just thought…

    Brikka

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