EUR/USD – Our working assumption has been that a 5th wave (of a larger wave 1) down in a 5 wave sequence from 1.3367 began at 1.3043. The longer term bearish scenario is best served by one more low below 1.2865, which would complete the 5th wave and give way to a 3 wave correction higher before the next leg lower. However, the 5th of 1 wave down may be truncated (meaning that it failed to break below the wave 3 low). If this is the case, then a 3 wave correction (wave 2) of 1.3367-1.2865 has already started. The bullish evidence that indicates a potential turn higher is the 5 small waves from 1.2876 to 1.2982. Price has retraced in 3 waves from 1.2982 to 1.2925. The 61.8% of 1.2876-1.2982 is at 1.2917 and is potential support. Confidence at the current juncture is low due to the divergence between the short term and longer term wave structures. Price is holding below the 20 day SMA, which does support the bearish case that we have favored for weeks.

USD/JPY – We still maintain our position regarding the longer term implications from the 13 month inverse head and shoulders pattern. A long term measured objective is at 128.67 – which is where the advance from 108.96 would equal the advance from 101.67 to 121.38. We have a shorter term measured objective at 123.21, which is where the rally from 117.97 would equal the 114.42-119.67 rally. However, the rally above 121.78 makes it possible to count 5 waves up from 117.97 so the USDJPY may be close to a short term top. Daily RSI has declined from above 70 and MACD slope is now negative. Initial support is today’s reaction low at 121.16. A decline below there shifts focus to the 1/25 low at 120.19.

GBP/USD – We maintain that weakness from 1.9915 is likely just the beginning of a much larger decline. Near term projected support is not until where the decline from 1.9736 equals the 1.9915-1.9645 decline. This is at 1.9461 (very close to the 1/9 high at 1.9455). A supporting trendline drawn off of the 10/16 and 11/17 lows has provided support this morning but this morning’s break below the 1/29 low at 1.9549 suggests that this is the beginning of either a 3rd wave or C wave decline. Again, measured support is at 1.9455/61. 1.9639 is key to the immediate bearish case.

USD/CHF – The USDCHF is little changed. The rally to above 1.2546 confirms that the decline to 1.2375 on 1/23 was the bottom of a corrective wave 4. The next bullish target remains the 1.618 extension of 1.2271 – 1.1878 / 1.2110 at 1.2746. However, since there are 5 waves up from 1.1878, we must be cognizant of the possibility that a 3 wave correction lower could take place at any time. A decline below 1.2422 would strongly signal that the larger correction has started. The rejection of today’s high, just above the previous high at 1.2568, indicates strong selling pressure.

USD/CAD – The USDCAD continues to trade sideways at the top of its yearly range. The 1.618% extension of 1.0927-1.1456 / 1.1028 is at 1.1883. 1.1883 is an ideal topping area for the USDCAD before the pair resumes its longer term downtrend to below 1.0927. The potential 2+ year bearish channel reinforces resistance at the current juncture. The topping scenario is best served by one more rally to above 1.1850 in order to complete 5 small waves from 1.1644. A decline below 1.1644 suggests that the decline has already started.

AUD/USD – The AUDUSD has formed an ending diagonal since the 1/26 high at .7753. An ending diagonal is choppy and consists of overlapping waves. The structure often signals either the beginning or end of a move (in this case…the end). We have focused on the possibility that the decline from .7979 is simply a 3 wave correction. The decline from .7936 is the C wave of a an A-B-C correction from .7979. In this case, .7714 would be where the A and C waves would be equal. The pair did decline below .7714 this morning, but held at the 50% of .7414-.7979 at .7698. A rally above .7753 strongly argues that another leg up is in the works.

NZD/USD – Kiwi broke below the 7 month trendline that we have recently been focusing on. We are looking for a decline to challenge .6778, which is where the decline from .7034 would equal the .7096-.6840 decline. This measured objective intersects with the 11/29 and 11/30 lows. .6778 could mark the end of a 3 wave correction and give way to another leg up. A decline much below .6778 gives scope to an extended decline towards the 161.8% extension of .7096-.6840/.7034 at .6619.

Jamie Saettele is a Technical Currency Analyst for FXCM.