I was concerned by the EURUSD action yesterday, so I reviewed the USD
and primary USD currency pair channels and patterns after hours to see
whether any technical damage has been done to the USD uptrend.
So far at least, the answer is no, and USD looks to have been
establishing a broad uptrend channel for the current wave up. I have
provisionally drawn in the most likely current wave channel which
suggests that the recent pullback has probably bottomed:
On EURUSD we have seen a return to near the top of the declining
channel.The next downtrend target is now 1.29 if hit the week after
Easter and 1.28 if hit two weeks later:
GBPUSD has returned to retest broken fan resistance for a second time.
If this retest fails then the next target downwards is in the 1.40
area, where there is very serious long term support. There is a lot of
uncertainty over a possible hung parliament in the imminent UK
election, and the chance that the current entirely worthless and
spendthrift socialist government may stay in power despite their
appalling track record. The time looks right for a 1.40 retest here:
The Swiss Franc was one USD currency pair that I was a bit concerned
about when I last did a full update a couple of weeks ago, as it had
failed to hit the top of the declining channel by a wide margin. It has
come close enough this week to count as a hit, and may yet exactly hit
the top of the channel on Thursday:
Of all the main USD currency pairs, the Yen has looked the weakest in
the last two weeks, with a break of strong fanline support that is also
the neckline on a nice looking sloping head and shoulders pattern. This
is a correction that is well overdue for the currency of the most
profligate and indebted government in the developed world. There has
always been an unreal air to me about the Yen as a 'safe haven'
currency. The next fanline support is at 105 on JPYUSD and the H&S
target is 100:
The two main commodity currency pairs have held up best in this
upswing. Of the two the Canadian Dollar is the easy winner, with an
intact uptrend channel. The top of that channel is now in the 105 area
and it looks likely to get that far, though we may not see much upside
until the current USD wave up has peaked:
The Australian Dollar has looked considerably weaker and has formed a
broadening descending wedge since USD bottomed. The next target is in
the 83 area, but of all the possible shorts here, this looks the
weakest to me. Both commodity USD currency pairs look much stronger
than all of the others:
There are a couple of things worth adding at the end of this review.
Firstly this USD uptrend now clearly appears to be a five wave uptrend
sequence, which means that after it ends we should see an abc
correction and then in all probability another five wave sequence up.
This may only be a rally on USD in the big picture, but it doesn't look
ready to finish soon, and it could yet go a lot higher than the 83.5 to
84 that this current wave up should reach.
Secondly, in terms of equities I was predicting a couple of weeks ago
that this USD wave up would see either a sharp retracement in equities
or sideways chop while it is ongoing. Obviously we've been seeing the
sideways chop and it seems likely to me that this will continue for
another week or two until the USD peaks.
As USD then settles into the
likely subsequent abc correction of the move from 74.23 to the 83.5 to
84 area, we should then see the completion of the fifth wave (or
extended third wave) in equities of which we are now in a sideways
fourth wave. That will bring us close or into the traditionally weak
period for equities May to October, and should be the start of the
first extended weak period for equities in over a year.
