UBS
EURUSD Still Southbound
EURUSD Bear Intact
Trend: Despite the sharp rise from 1.2529, trend conditions remain negative. Prices remain within the bear channel from 1.5144 (though bouncing from the bottom boundary), and the Dynalibrium line is heading south. We would have to see much stronger gains from the lows to turn this trend around.
Rhythm: The dominant 20-week nominal cycle (97-days from low to low) is in its base phase. While this is no reason to pick a bottom, it is a warning that the bear trend is running out of steam. The daily cycle-adjusted momentum indicator, while overextended, is in a hard down position.
Structure: Recent action has me adjusting the wave count a bit. I think the best interpretation labels the action from the 1.3818 mid-March high as a developing wave (v). Its subdivisions look like "three" so it's probably a diagonal triangle. The 1.3692 to 1.2529 three leg decline was wave iii, with the recovery from there as wave iv. It's holding below the 0.500 retracement of wave iii at 1.3111. Only a sustained move above 1.3248 (0.618) would lessen the odds of new lows in wave v though. As long as it holds, we should see a run at 1.2529. Beyond there, previous low supports are at 1.2458 and 1.2330, a measured target at 1.2297, where wave v would equal 0.618 of the net distance traveled in waves i through iii.
USDJPY 88.14 Support
Trend: Wild action over the past week has caused some whipsaw in the Trend-Cycle model, moving from bullish to neutral to bearish, and back to neutral. Very wide ranges and a neutral reading means this market's volatility is much greater than its ability to trend.
Rhythm: The dominant 20-week nominal cycle (90-days low-to-low) is in its plateau phase. And if the model were to hold onto to a bearish reading, i would have to consider the 94.99 high as the crest of this cycle. The bearish divergence on the cycle-adjusted momentum indicator certainly brings up that possibility.
Structure: The best wave count to explain the recent wild action labels the 84.83 to 94.99 as an (A)-(B)-(C) pattern, holding just below the 0.618 retracement of the 101.44-84.83 decline at 95.10. The sharp reversal through 91.60 support confirmed a wave ((X)) label at 94.99. Therefore as long as 94.99/95.10 continues to hold, patterns will favor the bearish camp. The recent 88.26 low may be wave ((A)), but regardless of labels, odds favor a run through the 88.14 (B)-wave low. A small Fibonacci support below there is around 87.23 ahead of the big wave ((C)) low at 84.83 from late November.
GBPUSD 1.5124 Key Resistance
Trend: The Trend-Cycle model has a negative reading. Prices are still in the bear channel from the 1.7043 April 2008 high. And finally, the Dynalibrium line continues to point south. So trend conditions are decidedly bearish, pointing to an eventual new trend low below 1.4477.
Rhythm: With the Trend-Cycle model in a bearish state, odds are that the 1.5524 mid-April peak marked the crest of the 20-week nominal cycle (102-days low-to-low). The cycle-adjusted momentum indicator rotated to the downside into negative territory, further confirmation that this cycle is in its bust phase.
Structure: The bearish reading in the Trend-Cycle model reasonably confirmed the wave 4 label at 1.5524. From there, wave 5 push below the 1.4784 wave 3 low and reached equality with wave 1 at 1.4479. The subsequent sharp rebound from 1.4477 may on the surface mean that wave 5 bottom. But close inspection of the hourly close chart (not shown) suggests that this rebound is only a fourth wave subdivision. The key level is 1.5124; it's the 0.618 retracement of wave 5 so far, and only a sustained move above it would hurt the chances for a new low. Until then, I'll favor an eventual run at 1.4338, the 0.764 retracement of the 1.3503-1.7043 big rise.
USDCHF 1.0744 Key Support
Trend: The Trend-Cycle model remains bullish, prices are still in the bull channel from the November lows (albeit backing off from the upper boundary), and the Dynablibrium line continues to point north. All suggest that the pullback from 1.1245 is merely a correction, and that a new trend high above it is a matter of time.
Rhythm: The 20-week cycle (109-days low-to-low) likely last bottomed in early April at 1.0435. It's boom phase should exert upward pressure on prices then till mid-June. The cycle-adjusted momentum indicator is rising in positive territory, completing a bullish rhythm picture.
Structure: The wave (iii) rally from 1.0435 pushed through 1.1184 (0.618 of the large C of (2) decline) and then reached the 1.1203 equality target with wave (i). Internal structures are difficult to read on the hourly close chart (not shown) though. But for now, as long as 1.0744 holds, I'll favor further upside progress toward the next big Fibonacci resistance at 1.1389.
AUDUSD Breaks 0.8888 Support
Trend: Conditions have taken a turn for the worse. The Trend-Cycle model has turned bearish, as prices broke down below the bottom of the bull channel that originated at the 0.6009 October 2008 low. The Dynalibrium line has flattened out, and is starting to roll over. More importantly, prices cracked it decisively, and have recently crawled back to it and the old channel line. Often this is a final look before the next leg lower.
Rhythm: The negative reading in the Trend-Cycle model likely means the 20-week cycle (111-days) crested at 0.9389 in mid-April. That's lower than its last crest from mid-November at 0.9406, and that means a break of its last trough at 0.8579 from early February is likely. The hard down position of the cycle-adjusted momentum indicator in negative territory completes a fully bearish rhythm picture.
Structure: The wave picture is tough, as there are a few possible interpretations. I'll talk only about the preferred which labels the mid-April high as wave 5 failure, completing wave (3) from the 0.6077 January 2009 low. That means action from 0.9389 is a developing wave (4). It's first target is the previous fourth wave of one lesser degree, wave 4 at 0.8579. A break there would open the door toward the second good target at 0.8134, the 0.382 retracement of wave (3). And only a break of 0.8108 - the 0.382 retracement of the 0.6009-0.9406 entire rise - would begin to turn patterns in favor of more bearish alternate scenarios.
USDCAD Model Neutral
Trend: Conditions have turned mixed. Prices moved above the bear trendline drawn from the 1.3064 March 2009 high. They've also moved above the Dynalibrium line. On the other hand, the Dynalibrium line is still pushing lower. So it's no surprise then that the Trend-Cycle model has a neutral reading.
Rhythm: The 20-week cycle (92-days) likely based early at the late April lows. I say this for two reasons: 1) Though not sustained, the Trend-Cycle briefly turned positive on May 6, and 2) The cycle-adjusted momentum indicator is rising in positive territory. Alone, rhythm conditions given this bear a slight bullish bias.
Structure: Sometimes when the market moves sharply against what you expect (1.0456 did not hold), it's best to go back to the drawing board and erase your wave interpretation. Unfortunately, as you can see on the daily chart, I don't have a strong alternate count to replace the old preferred one. About all I can do at this time is point out important levels. On the upside, there's a bunch for resistances running from 1.0781 to 1.1128. And on the downside, support is at 1.0238.
EURJPY Maintains Bearish Bias
Trend: The Trend-Cycle model maintains a negative reading, the Dynalibrium line continues to head south, actually increasing its downward pace recently, and a new bear channel, albeit a wide one, dominates the chart from the 139.22 June 2009 high. All have trend conditions in a rather negative state, and that means odds favor labeling the gains from the recent 110.70 low as merely corrective.
Rhythm: The negative Trend-Cycle model means that 20-week cycle likely crested last at 127.92 in early April. From there, we should see downward pressure on prices for another two months. The cycle-adjusted momentum indicator is heading south too, and in negative territory.
Structure: From a strict Elliott wave sense, all I can say for this pair is what a mess. Similar to the previous pair, it's best to erase old labels, and stand back for awhile. Sometimes after doing so, there'll be an "ah-ha" momentum that a new wave count will emerge from the muddied patterns. Until then, keep an eye on resistance at 123.86 and then 127.92, whereas support is at 115.13, the 0.618 retracement of the recovery from 110.70 so far
EURGBP 0.8865/74 Important Resistance
Trend: Descending away from the broader sideways trend since the 0.9803 December 2008 high, the short-term trend conditions maintain a bearish bias. While the recovery from 0.8428 has pushed out of the channel from the 0.9150 early March high, they remain below the downward sloping Dynalibrium line. Also, the Trend-Cycle model remains negative. So odds suggest that the recent recovery from 0.8428 is merely a correction.
Rhythm: The 20-week cycle has been in its bust phase since early March. The break of it's last cycle low at 0.8603 in late January points to a much lower cycle trough next time. The cycle-adjusted momentum indicator completes a very negative rhythm picture, currently heading lower in negative territory.
Structure: For now, as long as the 0.8865 (April 14 reaction high) to 0.8874 (0.618 of 0.9150-0.8428) resistance zone continues to hold, structures say the next big move will be lower. With the 0.8603 and 0.8456 supports out of the way, I'll look for an eventual run at the 0.8401 June 2008 low. Below there is 0.8241, 0.500 of 0.6678-0.9803.
EURCHF New Trend Low
Trend: The breakout from sideways trading resolved to the downside as expected, turning the Trend-Cycle model bearish. Thus prices remain in the bear channel that began back in August of last year at 1.5364. The Dynalibrium line is also descending and in little danger from prices in the near term.
Rhythm: The negative reading in the Trend-Cycle models means the 20-week cycle crested very early at 1.4466. So it should keep downward pressure on prices for quite some time. The cycle-adjusted momentum indicator remains in negative territory, completing a bearish tone to rhythm for now.
Structure: Patterns bring up the possibility that both trend and rhythm conditions are wrong. The drop from 1.4466 is wave ((v)), and having moved below the bottom of wave ((iii)) at 1.4145, it satisfied its minimum qualifications. But proof is in the price action, and right now, only a move above resistance at 1.4466 (previous wave ((iv)) high) to 1.4525 (0.382 of 1.5364-1.4006) would tip odds in favor of labeling the 1.4006 recent low as the bottom of wave ((v)). Until then, I have to respect the negative Trend-Cycle reading, and go with the flow.
Gold Eyes Old Trend Highs
Trend: The Trend-Cycle model's positive reading, the rising Dynalibrium line, and the up channel from the 682.41 October 2008 low all have trend conditions in a rather bullish state. Together, they suggest that a move above the old 1226.56 December 2009 big trend peak is likely a matter of time.
Rhythm: The dominant 20-week cycle (92-days) is in its theoretical bust phase, but it still has been unable to counter the underlying bull trend. Momentum conditions remain healthy though, as the cycle-adjusted indicator continues to rise in positive territory.
Structure: The developing wave ((5)) rally from the 1044.85 February low remains on track for a move through the wave ((3)) peak at 1226.56. I've fine-tuned the upside targets above there, ranging from 1368.73 (wave ((5)) equal to wave ((1))'s distance) to 1381.13 (wave ((5)) equal to 0.618 of the net distance traveled in waves ((1)) through ((3))).
Good support is at the recent 1157.60 reaction low from May 5, but only a break of 1124.00 (April 19 reaction low) would jeopardize the case for a move above 1226.
