All set for USD rally

Not much to say since the charts convey the message with ease.  Just that when the whole world was looking for Eastern Europe to be the first domino, Dubai turns out to be the catalyst.  But with the recent action, we were setup for wave [iii], so as always the news shows up at the perfect time, in terms of Elliott Wave structure.

Having hit a fresh high, Euro has pullback to its range and the longer it spends below the breakout level, the odds increase that the peak is in.

The Aussie confirms that its minute [iii] is underway.

As does the Kiwi.

High Yielders not in sync with Euro or $DXY

As Euro and USD hit new extremes for the year, high yielders have not done so.  The Aussie, as speculated in an earlier post, has made a higher high above what was then speculated as just wave a of a corrective move.

The subdivisions are reasonably clear as the entire move off minute [i] is an ABC (3-3-5) correction.  Subsequent action from what is currently labeled as minute [ii] is looking impulsive.  If this count is valid, then the Aussie should accelerate its decline swiftly over the coming days as minute [iii] should get going.  0.93 should be nothing more than a distant memory, after perhaps a small bounce from current levels.  Risk levels are clearly defined (and not too far away), making this an extremely attractive setup.

The Kiwi, while seemingly in a slightly different area in its wave structure has been unable to rise as much in magnitude (which bolsters the bearish outlook since minute [iii] is already underway.  It is also hugging the last remaining trendline, which has held as support thus far.

Declines should accelerate, much as the Aussie, since if this wave count is valid, we are looking at the third of a third wave scenario.

The Loonie’s subdivisions are not too clear/clean as one might hope.

The recent decline is in 3 waves so far (similar to what is labeled as minute [ii]).  As long as this low holds, the bullish outlook (USD strength) is the favored stance.  If risk is limited at the wave [ii] low, this too provides an attractive setup, though perhaps not as tempting as the Aussie scenario.

USD hits new low as Euro scales to new high for the year

$DXY hits new low for the year, as Euro thrusts out of a triangle.

The rise from the wave e low is looking impulsive.  There might be a few different ways to label wave e as well as the subsequent rise, but they would not be too useful yet.  Thrusts out of triangles retrace quickly and any move towards the apex of the triangle – just below 1.49 (near wave e low) and the subsequent action is likely to determine future action.

High Yielders retracing recent moves

The three high yielding commodity currencies are retracing their recent impulsive moves.  The Kiwi and Loonie are drifting slowly away from their peaks.  The Kiwi’s wave structure is fairly clean.

The Loonie’s wave structure is not as clean, but no major levels have been breached that would warrant reconsideration.

The Aussie as anticipated is rallying, but since hasn’t made minute wave [ii] yet, it would be prudent to wait a while as the risk of a new high is not completely removed.

The retracement so far is swift and while it could be counted as a counter trend, corrective ABC, the swiftness and time relation with what is now labeled as minute [i] makes the proposed wave counts highly speculative.  The current move could be wave a with waves b and c yet to come over the next few days, leading to further higher price levels (near wave ii of [i] highs).  With Euro potentially leading to a final thrust, Aussie could follow closely to do the same, eradicating the possibility of minute [i] down being in place.

Euro getting ready for a final thrust ?

The Euro’s picture remains unclear in terms of its Elliott Wave structure.

Due to a peek above the recent down sloping channel, the previously mentioned triangle scenario’s odds have increased.  The alternate triangle counts are in red, though confidence in either possibility is extremely low.  The general consensus seems to be that 1.52 has to be hit for the top and the exhaustion of the trend.

Euro slated to resume its decline

Euro has been channeling lower recently.  While the possibility of a consolidating triangle scenario cannot be completely ruled out, the recent action of the Comm Dolls is pointing towards that scenario losing impetus.

The best guess is that similar to the Loonie, Euro is making a series of small degree 1-2 waves and should accelerate the decline soon.  Coming under the wave b low will cement the top and remove any remaining bullish potential.

High Yielders getting in sync

Kiwi and Loonie had already started their move off their respective highs while the Aussie was the sole currency among the high yielding Commodity Dollars that made a new high.  Now Aussie is also joining the move towards stronger USD.

Kiwi provides the cleanest of patterns.

It is clear that minute [iii] is underway.  It’s only speculative to now label the internal subdivisions of this at this juncture.

Loonie on the other hand appears to have made a series of 1-2 smaller degree waves.

Again, it would be highly speculative to try to label the internals, but it’s clear the minute [iii] is underway as well.

Aussie has made a 5 wave move off the new high and has broken the long term channel.

If this completes minute [i], then a forthcoming counter trend move will provide the first best opportunity to sell.

Biding time

Recent days have seen consolidating action, which are either wave [ii]s or wave [iv]s.  While Euro has not made any new highs, spending so much time so near the high is not encouraging for the bearish outlook.

While only coming below wave b low will eliminate all bullish potential, if this is a triangle with the final peak yet to come, a break of 1.4814 is likely to result in a swift move towards 1.47 or so.  Usually in triangles, wave B is the most “messy”, with overlapping, time consuming action.  Since we should already be in wave C of a triangle, if the triangle scenario is valid, confidence in this outlook is not very high.

Aussie is in a similar boat, though it has made fresh highs.

From 0.8914, 5 waves are complete, which itself should be wave [v] of v of 2/B.  Subsequent action is not mature enough to warrant clear labeling.  The first attempt at the break of the lower channel has “failed”.  The next one is likely to be only minute [i], which should also ideally “fail”.  The third attempt is likely to succeed, as that would be minute [iii].  Obviously, at this time, this is pure conjecture.

Loonie has pierced thru the technically significant 1.06 level and as long as the 1.04 level holds (what is marked as wave [ii], the bullish outlook (USD strength) is clearly the primary expectation.

Swissy and Kiwi are exhibiting similar patterns.  Cable is muddy enough to not warrant any speculation.  It seems to be the sole currency that has more bears than USD (or at least close enough).  Action from 1.58 to current 1.67 levels should have trapped the bears with great deal of pain.  Potentially we are in a wave 4 triangle or some consolidation pattern, with a high above 1.70 completing the entire move off 1.35 lows from earlier this year.  Any remaining trapped bears are likely to throw in the towel at that point.

Yen has also completed what appears to be a double zigzag (with an extended Y).  If this is valid, then the next move of significance should be Yen weakness (USD/JPY strength, towards 101 or thereabouts, from current 89 levels).  The long term target of under 80 is needed to complete the wave 5 target that has been in the making for about 25 years.

Aussie’s target hit ?

The leader during the USD decline since March 2009 has been the Aussie.  The most watched and most traded currency (as per the open interest in Globex futures) is likely to hold the key for confirming the reversal.

The wave [v] of 2/B itself has subdivided in 5.  The highs during the past few days has been riding the center line of the channel, which is a common place for a wave v to peak out:

A break of the lower channel is likely needed to confirm that a top is in.  With $SPX also hitting the resistance line from it’s all time high and wave 2 of 1/A, a reversal in Aussie could signal the turn in all risky assets.

Loonie resuming its decline ?

Much like the Euro, Loonie did not make a new high.  The wave counts did not require big changes, though it had to relabeled to mark minute wave [i] to be complete:

The corrective decline is in 3 waves so far and has consumed ample time to look for evidence of the resumption of the trend.  The channel of wave c of [ii] has already been broken.  A move above 1.0610 will likely confirm the next leg up.