By DailyFX – The high made on 7/18 at 1.3832 remains intact. As we focused on yesterday, the 3… … wave rally from 1.3752-1.3830 suggests that 1.3752 will be broken.

The decline unfoidng from 1.3830 is most likely
either a wave 3 or a c wave. A short term bearish target is the 161.8%
extension of 1.3832-1.3752/1.3830 at 1.3700. This is also a former 4th
wave/congestion area from 7/10. The bearish alternate has a triangle
unfolding from 1.3832. 1.3832 is key to the short term bearish case.

Strategy: Remain bearish, against 1.3832, target 1 at 1.3700, target 2
TBD

Commentary: The high made on 7/18 at 1.3832 remains intact. As we
focused on yesterday, the 3 wave rally from 1.3752-1.3830 suggests that
1.3752 will be broken. The decline unfoidng from 1.3830 is most likely
either a wave 3 or a c wave. A short term bearish target is the 161.8%
extension of 1.3832-1.3752/1.3830 at 1.3700. This is also a former 4th
wave/congestion area from 7/10. The bearish alternate has a triangle
unfolding from 1.3832. 1.3832 is key to the short term bearish case.

Strategy: Remain bearish, against 1.3832, target 1 at 1.3700, target 2
TBD

Commentary: Cable has backed off following the spike through the
resistance line drawn off of the 6/12 and 7/3 highs. The short term
pattern that we favor remains similar to that of the EURUSD. We are
treating the spike this morning to 2.0541 as the top of wave b (or ii).
Therefore, we are looking for a decline in wave c (or iii) to just below
2.0459. This indicates a very short term bearish opportunity, but the
trend remains bullish above 2.0365 (as the count shown today indicates).
A new high (above 2.0547) would be wave iv within the rally from 2.0056
(which is larger wave 3) and give way to a larger correction. A break
of 2.0364 indicates additional bearish potential (and potentially a
significant reversal).

Strategy: Flat

Commentary: We wrote yesterday that “we maintain that the USDCHF is
forming a low. Similar to the EURUSD (but the inverse), the USDCHF
rally from 1.1960 is an impulse (5 waves), indicating that the near term
trend has turned to the upside. Initial resistance is at 1.2068
(trendline resistance is at 1.2090 as well) but the ‘5 up’ from 1.2960
indicates additional bullish potential.” The pair hit 1.2064 this
morning. Since the rally from the low is in 3 waves and at the cited
resistance, we recommend that longs keep risk to 1.1982. Risk of a
decline is high.

Strategy: Move to flat (previously bullish)

Commentary: The USDCAD is little changed. “We have been looking for a
bottom due to speculative positioning and the longer term wave
structure, which has an ending diagonal unfolding from 1.4000. The
rally from 1.0400 is impulsive, indicating that the trend has turned. A
bullish bias is warranted against 1.0400. An inverse head and shoulders
pattern may be playing out in the short term as well. A rally through
1.0477 increases confidence in the bullish outlook.” The decline from
1.0477 is in 3 waves and the 3rd leg of that decline is also in 3 waves,
which bolsters the bullish bias.

Strategy: Bullish now, against 1.0400, target TBD

Commentary: We wrote yesterday “that an ending diagonal may be
unfolding and that the potential for a turn is high”. The Aussie spiked
to .8811 this morning and has backed off to below .8800 since. Risk is
for a retrun to .8707, which was the origin of the diagonal. The larger
4th wave that are looking for may be beginning. This outlook has a
correction unfolding for the next seversal weeks.

Strategy: Flat

Commentary: We are looking for a decline in a 4th wave towards the 7/11
low at .7714. Potential channel support is at .7770 today. Coming
under .7882 indicates additional that wave 4 is underway. The
confluence of psychological resistance (.8000) and the resistance line
drawn off of the June and July highs should provide formidable
resistance. The larger trend remains towards higher prices (as
indicated on the chart) but we are looking for a pullback first.

Strategy: Flat

DailyFX Research Team
Forex Capital Markets LLC
32 Old Slip, 10th Floor
New York, NY 10004
Tel (212) 897-7660
Fax (212) 897-7669
E-mail: research@dailyfx.com