US Dollar Group: Our reading of the cycles suggest USDX cycle that started on 4th April is coming to an end. Shorter cycles however suggest the possibility of another leg down in USDX (after a pull back at beginning of the week) and levels between 78.18 – 78.55 could be tested. 14 period RSI is showing on-going divergence with price which reinforces our view that a cycle is coming to an end and we should at least get a corrective move higher in USDX. However, wave count in SPX500 (Cash) suggests that the next move up in USDX could prove to be strong and levels around 81.00 (or higher) could be seen. EURUSD wave count is on track and reading of the cycles suggest that cycle from 1.2993 is coming to an end. We do expect another leg higher (after a pull back at beginning of the week) and levels between 1.3281 – 1.3330 could be seen by Tuesday / Wednesday. This is the ideal time for a peak and pair should turn lower and ideally drop below 1.2993. Price must remain above 1.3160 for this interpretation to remain valid as a drop below this level would suggest that pair has peaked ahead of schedule. GBPUSD refuses to show any signs of weakness as the rally continues. A pullback is expected at beginning of the week but as the uptrend line holds, expect another rally to as high as 1.6335 before the pair forms a peak and turns lower. Only below 1.6155 would negate the new high.
FX Commodities Group: Shorter cycles in AUDUSD are pointing toward further strength into the middle of next week. As the pair holds above the breakout point (1.0390 – 1.0400), expect rally to continue and resistance between 1.0500 – 1.0550 to be tested. We will be watching for signs of failure around this level and EW trigger (5 waves down on 5 min chart which breaks below 4th of lesser degree support) to positions ourselves short for next leg of the downtrend. USDCAD managed to break 2 month range low (0.9840) during the last week and though we believe the pair is approaching the right time for a medium term low, shorter cycles however suggest that pair could trade as low as 0.9750 before forming a low. Price must remain below 0.9877 for this interpretation to remain valid as a rally through this level would suggest that pair has bottomed ahead of schedule.
Indices & Commodities: SPX500 (Cash) recovered sharply after a full test of 1357 low and 5 wave rally with good sub-division of waves from 1357 supports our view of a FLAT (3-3-5) correction. Our resistance zone of 1397 – 1407 has been tested. There is scope for a pullback at beginning of the week, if this pullback proves corrective and holds above 1390 support, expect another high to about 1407 – 1410 to complete 5 waves from 1359 and FLAT correction from 1357. We believe this will provide an excellent shorting opportunity for next leg of the downtrend (only above 1421 negates). We believe DAX is also in a FLAT correction since 15th April low (6529) as OPPOSED to the idea of a 5 waves down from 7194 and rally from 6497 being first leg of the recovery. Resistance between 6871 – 6900 could be tested to complete wave (c) of ((b)). This would leave the Index vulnerable to a drop below 6497. Oil (CL) continues the prolonged consolidation / range trade which can break on either side but given our mid-term bearish view in Indices we favor the idea that range will break to the downside. A drop below 100.65 will expose 99.04 (76.4 fib) as the first target. A break above 105.47 on a daily closing basis, however, is needed to suggest that consolidation is breaking to the upside and 107.00 would become the first target in such a case. Break 3.72-3.74 range high in HG_F (Copper) led to further gains and our target of 3.80 has already been reached. Shorter-cycles suggest that metal is in a FLAT correction from the low and with wave (c) underway. A pullback in wave (iv) and a new high in wave (v) is expected. 3.85 could be tested but be wary of a failure around this level as that would leave the metal vulnerable to a drop toward 3.50 (at least).
Trade Safe & Good Luck
Elliottwave Forecast Editorial Team