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Feb 27 2013

USD index recovered very sharply last week but don't let the strong rally trick you. The fact is that current sharp leg up could easily be wave C) of a flat correction in wave (B) which is unfolding already since September 2012. In fact, price is approaching to some very interesting resistance zone around 81.70-82.00 (61.8% Fibo) where bulls could slow down. As such, larger trend for this market remains down, but only impulsive weakness from that resistance and back to 80.30 figure can confirm the bearish case. In such case we will look for a fall through wave (A) supports. In fact on a weekly chart below we are also observing a huge head and shoulders pattern while 84.00 level is not breached.

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USDCAD is higher, but pair could be in final stages of an uptrend in wave (iii) as we can count five waves up from 1.0000 with current fifth wave approaching to some key Fibonacci resistance levels around 1.0290. We know that after every five waves correction follows so reversal from here would not be a surprise but pull-back will be temporary blue wave (iv) that may retrace back to 1.0150-1.0200; wave four zone of one lesser degree. Keep in mind that larger trend for USDCAD is up, so we will continue to look higher after a pull-back while 1.0087 invalidation level is not breached.

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GOLD moved lower as expected, but because of a very sharp and aggressive sell-off we reworked the wave count. We are now tracking a three wave A)-B)-C) Elliott wave pattern from 1795 swing with wave C) underway, which appears incomplete as we need five waves down from 1696. As such, Elliott traders must be aware of more weakness in this week as current recovery could be a black wave 4 that will look for a tip around 1595-1605. Market remains in bearish mode as long as 1651 resistance is not breached. Under this bearish scenario prices could hit 1525/30 level where red wave C) equals to wave A) measured from wave B) high.

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Feb 20 2013

EURUSD is in recovery mode after a sharp fall down to 1.3300 last week. For now, rally from the lows cannot be counted in five waves and pair is also still trading well below 1.3518 invalidation level. Therefore, we think that complex corrective decline from 1.3710 is incomplete and that market will make one more push down, towards 1.3250 in this week to complete wave C of a second zig-zag that we are tracking. Pair is now testing a very important level around 1.3430/60 which appears to be ideal resistance zone for wave B; 61.8% retracement and also wave B equality from a second zig-zag. An overlap with 1.3370 would confirm the bearish view. Any new, aggressive shorts should have stops above 1.3518.

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Feb 17 2013

A decline from 2008 peak to 2009, 1.3500 low was in five waves, which in Elliott Wave theory indicates a direction of a larger trend. This is called an impulse wave, and once this leg is complete you will see a reversal in price, against the trend, normally into a slow, choppy and overlapping price action which is personality of a correction. Well, this is exactly what has market experienced since 2009 lows. As such, we are very confident that pair made a corrective pattern in wave (B) position called a triangle. In fact, this triangle could already be in place as current price closed below rising trend-line connected from 2009 low.

We however still want to see a break of wave D) 1.5267 low that will confirm the bearish view for wave (C) fall towards 1.3000.