Euro Tests 1.3360
Commentary: We wrote yesterday that “a test of 1.3445 looks inevitable now as price is below 1.3500 now. The extent of the decline from 1.3838 makes it highly unlikely that this decline is a C wave. Instead, it is much more likely that this decline is a 3rd wave.” Price dropped right through 1.3445 to test 1.3360 this morning. We maintain that the decline from 1.3838 is wave 3 within a larger 5 wave decline from 1.3852. Larger wave 4 should begin to unfold soon. Near term resistance is at 1.3447. Since a 5th wave is still to come, there is little chance of a significant bottom forming at nearby levels.

Strategy: Bearish target hit at 1.3445 (waiting for wave 4 retrace in order to get bearish)

Japanese Yen 10-Figure Move Since June
Commentary: The action this morning makes it likely that the USDJPY is currently entrenched in a wave 3. The count that we proposed yesterday had the USDJPY bottoming near 115.53 in a 5th wave (larger wave 1 down from 124.13), which would be followed by a wave 2 back towards 119.83. It is still possible that the decline from 119.83 is wave 5 down within the 5 wave decline from 124.13. In this case, the risk of a correction back towards 119.83 is high, but not until some consolidation in small wave 4 is followed by lower prices to complete the decline from 119.83.

Strategy: Flat, we will be waiting for the larger wave 2 to unfold before getting aggressive

British Pound Nears 1.9700 Objective
Commentary: We wrote yesterday that “that 1.9700 will be tested before the week is over. Wave 3 down has been unfolding since 2.0462. Within wave 3, the decline from 2.0397 is a third wave. Therefore, look for a corrective 4th wave to play out before a test of 1.9700 and completion of wave 3 from 2.0462. A larger 4th wave would then be expected.” The small corrective 4th played out and ended at 1.9958 and price then dropped to 1.9769 (close enough to our objective of 1.9700 to suggest that near term bearish potential is limited). The larger 4th wave that we mentioned yesterday should unfold soon and bring price back to 1.9958 (+-) before a drop in wave v of 3 towards 1.9500. The correction will probably be choppy though, possibly a triangle or a flat. On the weekly (or daily), the Pound has dropped below a supporting trendline that dates to October 2006.

Strategy: Move to flat (previously bearish), looking for a retrace to 1.9958 to get bearish again

Swiss Franc Through 1.2215 Would Make 5 Waves
Commentary: Please see yesterday’s commentary for longer-term analysis. A push through 1.2215 will make the rally from 1.1815 5 waves and indicate that a longer term bull trend is underway. Near term bullishness is limited though as the rally through 1.2215 will complete larger wave 1 and give way to a corrective decline in larger wave 2. That will offer an opportunity.

Strategy: Flat

Canadian Dollar Through 1.0800
Commentary: The USDCAD continues to work higher in an impulsive manner, proving our thesis that a significant bottom is in place at 1.0340 correct. We are looking for this rally to challenge 1.1043 (161.8% extension of 1.0340-1.0699/1.0462) before any sizeable retracement occurs. Near term, a correction to 1.0726 offers an opportunity to align with the bull trend. We are showing the 15 minute chart this morning.

Strategy: If already bullish then remain so, against 1.0641, target 1.0821 hit , target 2 at 1.1043. Those on the sidelines can look to align with the bull trend at 1.0726

Australian Dollar Drops Like a Rock
Commentary: The idea that the Aussie would bottom near .8162 and head higher was certainly wrong as the AUDUSD has plummeted below .8000. The decline from .8661 needs to undergo a small correction before registering a new low, after which a larger correction in wave 4 would offer bears the opportunity to act.

Strategy: Flat

New Zealand Dollar at Down 13 Figures Since End of July
Commentary: Kiwi is in a similar situation (compared to Aussie). The next potential support level is the 3/6 low of .6719. The extent of the decline from .7701 leaves little doubt that wave 3 is in progress. The good news is that this is wave 3 of larger wave 1. Therefore, we should see a decent sized retracement in the coming weeks in order to position for the next big leg lower. Near term, the decline is subdividing but a short term bottom should occur soon. A rally to .7201 offers an opportunity get bearish.

Strategy: Flat

Jamie Saettele is a Technical Currency Analyst for FXCM.