Euro May Trade In a Choppy Manner Near Term
Commentary: There is little change to what we wrote yesterday, although the pattern has cleared up a bit. “The decline from 1.3838 is either large wave C to complete an A-B-C correction, wave 3 in a bearish sequence that began at 1.3852, or larger wave A to begin a larger correction from 1.3852. A rally above 1.3546 would make the advance from 1.3360 impulsive (5 waves) and favor additional gains. A rally through 1.3608 would eliminate the idea that wave 3 down unfolded from 1.3838.” With the rally this morning leaving a clear 3 wave correction from 1.3546 to 1.3456, it looks as though 1.3546 will be breached. As mentioned though, once that level is broken, risk of a correction right back to 1.3456 (or lower) will is high.

Strategy: Wait for a rally through 1.3546 with 1.3456 intact, then a correction back towards 1.3456 (or lower). That will offer an opportunity to get bullish.

Japanese Yen 113.73 Short Term Resistance (USD/JPY Support)
Commentary: It remains our working assumption that “the rally from 111.59 may be the first leg of a 3 wave correction that will be larger wave 2. Potential reversa points prior to 119.83 are 117.86 and 119.34 (50% and 61.8% of 124.13-111.59).” 5 waves down from 124.13 appear complete so we expect this rally from 111.59 to unfold in a corrective manner and challenge the mentioned Fibonacci reversal zone (117.86 or 119.34). Former support at 117.20 may now be resistance. Near term, 113.73 (61.8% of 111.59-115.50) should be solid support.

Strategy: Look to get bullish near 113.80, against 111.59, target 1 117.80

British Pound Bullish Above 1.9743
Commentary: We wrote yesterday that “Cable appears to have some additional downside potential, but not before a push through 1.9935 occurs in order to complete a corrective advance (wave iv) from 1.9651. Following the completion of wave iv, we expect price to register a new low (beneath 1.9651) in what will be wave v of 3. A larger 4th wave correction would be expected following the new low. This view is favored as long as price is below 2.0155.” It is still possible that the GBP/USD registers a new low (beneath 1.9651) in order to complete the decline from 2.0462, but it is also possible that a more bullish pattern is underway since the decline from 1.9935 is in 3 waves and the preceding rally from 1.9651 is an impulse (5 waves). The decline from 1.9935 also retraced about 61.8% of the advance from 1.9651. For this reason, a cautious bullish stance is warranted above 1.9743.

Strategy: Bullish above 1.9743, target TBD

Swiss Franc Same as Euro (but Inverse)
Commentary: We wrote yesterday that “downside potential remains. A drop under 1.1993 would complete 5 waves down from 1.2215. If this happens, then we will look for a corrective rally in order to get bearish.” This pattern is the same as the EUR/USD (but the inverse of course). It looks like price will launch an attack on 1.1993, so look for a pullback following a new low (under 1.1993). Initial resistance would be just under 1.2100.

Strategy: Following a new low (under 1.1993), look for a pullback towards 1.2100 in order to get bearish against 1.2215.

Canadian Dollar 1.0657-1.0738 Buy Zone (USD/CAD Sell)
Commentary: With the decline from 1.0866 to 1.0531 in 5 waves, at least one more down leg is expected. 1.0657 is a potential reversal point (resistance) as is the 61.8% of 1.0866-1.0531 at 1.0738. Once we see evidence that the advance from 1.0531 is complete, we will publish bearish targets.

Strategy: Look to get bearish between 1.0657 and 1.0738, against 1.0866, target TBD

Australian Dollar Giving Way to Wave 5?
Commentary: The Aussie is in an interesting position right now. The advance from .7673 has stalled at the 38.2% of .8661-.7673. The rally is also in 3 waves so it is possible that a 4th wave is complete or close to complete at .8065. A drop under .7673 would complete 5 waves down from the top (.8870) and give scope to a large correction higher.

Strategy: Flat

New Zealand Dollar Little Changed
Commentary: Kiwi is in a similar situation (compared to Aussie). That is, a 4th wave correction may be complete or close to complete at .7026. The 38.2% of .7701-.6639 is at .7045 and is potential resistance. A drop under .6639 would make the decline from the top (.8108) 5 waves. A large upward correction would follow.

Strategy: Flat

Jamie Saettele is a Technical Currency Analyst for FXCM.