It was a strange dollar reaction yesterday (Friday) on the blow-out jobs report. Slight rally, meander, then acceleration lower. The question: If the US dollar cannot rally on blow-out job news, what will it take? Of course, the yen again was the odd man out, weakening on the day. Hmmm... Is the yen driver risk on risk off, or the Bank of Japan, or a seemingly improving economy? At this point I have not a clue; but we will continue to trade technical opportunities as we see them, with a downside bias still in USD/JPY after more weakness near-term. As you can see in the chart view below, USD/JPY seems out of synch with EUR/USD near-term.
I think it makes sense to work from the premise—the dollar index is in the final stage of the decline which began in January 2017; minute Wave 5 down to complete a major Wave 1 impulse move lower—targeting to mid-81 level. Once this minute Wave 5 down completes, I am looking for a significant rally in the dollar to wrong foot the market, very similar to the 2017 decline which wrongfooted the market (including me).
USD/JPY Daily: The change here is near-term the price action suggests a possible alternative count i.e. further rally back toward 108-50 range before the move lower resumes.
EUR/USD Daily: In minor Wave (ii) decline—complete? The pull-back to 1.2271 in minor Wave (ii) represented a 61.8% retracement of minor Wave (i). And a 1.618 extension carries the pair to our favored target near 1.2750 to complete Wave 5 of Major (1). A break below 1.2153 nullifies this view.
GBP/USD Daily: No change of view here. Working from a completed Wave 4 at 1.3710; setting up for strong Wave 5 rally. Key support is the Wave 4 low at 1.3710; a break below there suggest a more complex correction—double zig zag for example.
USD/CAD Daily: This is a new daily view showing the EW labeling from the swing high up at 1.4589. The primary view is we are now in Wave B corrective, which should push down toward 1.2500 or beyond; before a new rally phase begins taking the pair to 1.3100-3200 level.
AUD/USD Daily: An upgraded daily view here. Looking for a rally in Wave (B) toward 0.8000; then a push down toward 0.7611, with an alternative view to 0.7522, before a major rally ensues.
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