In my prior post, I summarized the biggest opening drop of a New Year in history with this chart back in January.
Two weeks ago I wrote that the USD/CAD would likely see more downside in the weeks ahead. At the time of that writing the pair was trading at 1.3517 some 350 pips over the low that we saw last week at 1.3166. We are now approaching an area of key support that should be key in helping to give us clues as to where we are heading in this pair over the next several months. The question at hand is whether the January top was, in fact, a major multi-year top in this pair or whether we will yet see higher levels before we can consider this multi-year top in place.
Looking at the daily chart, we notice a few different things from a technical and Elliott Wave perspective that are giving us signals we may be closing in on at least a temporary bottom. The first is that we have what we can consider a completed (or very close to completed) abc corrective pattern into the current levels. While on the smaller degree timeframes this corrective pattern would look slightly better with one more low, we do technically have enough waves in place at the current levels to consider this move off of the January highs as a fully completed ABC.
In January 2015 I posted an Insta-blog on Seeking Alpha calling for a low in the 280 region prior to the January earnings report. In that post I called for a resumption of the long term rally looking for a target well over 450. AMZN did not disappoint, and in our regular StockWaves updates we tracked the progress and continued to revise the extension targets and raise the support levels. While the potential for further extension in this Primary degree 3rd wave is still possible, the failure to hold higher levels of support as well as the failure to utilize the most recent ER for a potential extension setup makes it more likely that the early stages of the Primary Wave 4 are underway.
The main drivers of the large move down in the US Dollar’s DXY index a week ago Thursday (Dec 3) were the European currency pairs with the USD/CAD and USD/JPY mostly sitting out the decline in the DXY index. The GBP/USD was certainly up on Thursday but had very much underperformed the gains that were seen in the DXY Index as a whole.
The picture is even more dramatic if we look at the weekly data which is now in. Viewing an entire week’s worth of data we can see that the European currency pairs accounted for over 98% of the losses in the DXY Index for the week with the EUR/USD accounting for over 85% of the indexes drop. Additionally not only did the USD/JPY and USD/CAD currency pairs end the week fairly flat they had very little movement throughout the entire week as well trading in a very tight range.
The market is now full of dollar bulls and the main reason there are so many bulls is due to the strong rally we have seen since May of 2014. Yet, any one left within the dollar bear camp is amazingly still screaming for the demise to the USD. Many have claimed, week after week, that the dollar is about to crash, but, alas, the dollar has had other plans, just as we expected back in 2011.
And, just as we were dollar bullish well before the masses have joined us, we are now going to turn dollar neutral very soon for the intermediate term. To that end, I believe the next year or so will likely frustrate both bulls and bears alike. You see, the market is now approaching the target zone for what we were expecting as the top of wave 3 off the 2008 lows. That means that the multi-year rally I was calling for back in 2011 is approaching a climax for wave 3. And, for those that know how to count, after wave 3 comes wave 4.