Commentary: We have favored the downside because we were looking for a deeper decline to more fully correct the 5 wave advance from 1.3360-1.3718. This is still possible but the rally from 1.3551 is in 5 waves itself and suggests additional gains as long as price is above1.3551. Allow for some weakness to be followed by a strong rally in wave iii of 3. This short term outlook is negated on a drop under 1.3551.

Strategy: Flip to bullish, risk is at 1.3551, target above 1.3852

Japanese Yen Large Correction
Commentary: Continue to wait out this correction. There are multiple possibilities but one that we are following has the entire rally and correction from 111.59 as a triangle. This would mean that wave E of the triangle is unfolding now and will end before 116.46 before a terminal thrust lower (below 111.59). We are showing this count today. Another count treats the 111.59-117.12 rally as wave A with a triangle unfolding in wave B. What would follow is some additional consolidation followed by a thrust towards 119.00 in wave C before a top and reversal. Either way, look for additional consolidation before a break. From a trading perspective, go with the break (below 113.85 and above 117.12).

Strategy: Flat (waiting for wave 3 bearish opportunity)

British Pound Flat Correction Underway
Commentary: Cable is tracking our count. 5 waves ended at 2.0233, so we are looking for a decline to at least the prior 4th wave at 1.9961. The 61.8% of 1.9651-2.0233 at 1.9874 is also a potential bottoming point. The rally this morning to 2.0262 is most likely wave b within a flat correction. Look for wave c of the correction to bring price just below 2.0043 before the larger rally resumes.

Strategy: Flat

Swiss Franc 5 Wave Impulse
Commentary: The count is tracking perfectly. We wrote yesterday that an expanded flat may have ended at 1.2151 and to remain bearish as long as price is below 1.2215. The clear 5 wave decline from 1.2151 to 1.2010 confirms that the thrust below 1.1815 is in its early stages. Allow for a 3 wave correction to at least 1.2062 and possibly 1.2097 (61.8% of 1.2151-1.2010). That sets up an opportunity to get aggressively bearish against 1.2151 for wave iii of 3 lower.

Strategy: Remain bearish, move risk to 1.2151 (from 1.2215), target below 1.1815

Canadian Dollar Remains In a Range
Commentary: USD/CAD price action remain choppy. The head and shoulders continuation pattern is on the verge of confirmation as price has tested the neckline this morning. However, the structure of the decline is not clear, which makes going with this break dangerous. The longer term wave structure also gives scope to a major reversal. This is why we favor playing a break above 1.0676.

Strategy: Bullish on a break above 1.0676, against 1.0340, target TBD

Australian Dollar Should Drop Lower
Commentary: The rally from .8051 is most likely wave b of B within an A-B-C from .7673. Look for a drop below .8051 and possible test of the 61.8% of .7673-.8333 at .7925. A bullish opportunity presents itself there as we would then look for price to turn higher in wave C of the correction from .7673 and eventually test the 61.8% of .8870-.7673 at .8412.

Strategy: Flat

New Zealand Dollar To Test 78.6% Fibo
Commentary: We wrote yesterday that “Kiwi has falied to turn higher, opening up the possibility of a test of .6869. The next potential support level would be the 78.6% at .6775 followed by the low at .6639. Given the outlook for the Aussie, we expect one more rally leg (above .7272) before the next major bear wave.” Allow for a bit more weakness towards the 78.6% at .6775 before a strong rally above .7272.

Strategy: Flat (look to get bullish close to .6775, against .6639, target above .7272

Jamie Saettele is a Technical Currency Analyst for FXCM.