Weekly Market Overview (10.6.2013)

Let’s take a look at the Weekly Market Overview presented to clients on 6 October 2013. We discuss the key Elliott wave structures and trade setups that we like for week ahead based on the Elliott wave analysis.

 

Weekly Market Overview

10.6.2013   11:50 AM EDT

USDX Group:

EURUSD  is showing 7 swings higher from 4.4.2013 low (1.2746) low so we know that cycle is mature and very close to ending. Dip to 1.3102 was 6th swing and rally since then is part of the 7th swingKey short-term pivot point is 1.3457 and as this level holds, we expect to see another push higher toward 1.3770 to complete a cycle from 4.4.2013 low. A break of 1.3457 would suggest cycle from 1.2746 is most likely over and will make no different to the trading strategy. We would still be looking to buy the pair but from lower levels around 1.3200 (50 fib). Hourly cycles are positive so we don’t like selling the pair.

GBPUSD turned sharply lower after making new highs to 1.6260. Decline from 1.6260 peak is impulsive and wave ( iii ) of (( iii )) appears completed. Expect a recovery at start of the week which should fail between 1.6058 – 1.6092 and as long as price stays below 1.6120, expect more downside toward 1.5885 – 1.5900 to complete a 5 wave drop from 1.6260 high. We believe this would complete a bullish FLAT wave B and pair should then turn higher for new highs above 1.6260. If the recovery following completion of a cycle from 1.6260 proves to be corrective and sideways, then we have to consider the ALT view that pair has completed cycles from 1.5426 and 1.4816 lows. Strategy remains to buy the pair after completion of a 5 wave drop from 1.6260 high and see how far it takes us.

USDX preferred view is no longer that of an expanding bullish triangle. We believe Index is set for a deeper correction which can reach as low as 76.00 before cycles turn bullish again. Following completion of a cycle from 82.67, we believe a shallow B wave correction is over @ 80.66. As price stays below this level, expect more downside toward 79.20 after which Index would be in a position to correct the entire drop from 84.75 peak. Hourly cycles remain negative and hence we don’t like buying the Index  and strategy remains to fade strength as long as 80.66 high stays in place.

To summarize, hourly cycles are negative in USDX and USDCHF and positive in EURUSD and GBPUSD. EURUSD pull back seen supported around 1.3492 and we favour another leg higher as long as 1.3457 low is intact. USDCHF is about to complete wave (( iv )) as as FLAT and as price stays below 0.9165, we like more downside in the pair. GBPUSD is in FLAT wave B and we like buy at the end of the current cycle expected to complete around 1.5885 – 1.5900 area

FX Commodities:  

NZDUSD completed a corrective cycle from 0.8438 – 0.8190. Short-term as price holds 0.8248 – 0.8263 area and more importantly stays above 0.8190 low, more upside would be expected in the pair. New highs above 0.8438 would expose 0.8500 – 0.8550 area from where pair should pull back at least in 3 waves. A break of 0.8190 will suggest rally from 0.7684 – 0.8438 was a 3 wave move and will expose lower levels toward 0.8060 – 0.8117 to complete wave ( X ). Hourly cycles are positive so we clearly don’t like selling the pair but due to lack of clarity in shorter cycles, pair is not presenting the clearest of trading setups in the near-term.

 

AUDUSD has already made new highs above 0.9438 and while above 0.9368, near-term focus is on 0.9484 which is the equal legs target up from 0.9279 low. A cycle from 0.9279 should be ending soon and would result in pair trading lower toward 0.9350 – 0.9380 area at least and could even drop to new lows below 0.9279 as per ALT view. Hourly cycles are positive so we don’t like selling the pair but new longs are also not recommended at this stage.

 

USDCAD decline from 1.0569 – 1.0179 was a 5 wave move with an extended 5th wave. We believe that complete a cycle from 1.0569 and most likely from 1.0609 as well. We have seen a corrective 3 wave recovery to 1.0357 and a cycle from 1.0179 is over. It remains to be seen whether pair would hold 61.8 fib (1.0248) for another push higher toward 1.0425 – 1.0467 to complete the correction or would drop to new lows toward 1.0100 – 1.0130 to complete a cycle from 1.0609. We don’t like buying the pair as hourly cycles remain negative. We still like more downside in the pair but lack of clarity in shorter cycles suggest it’s best to stay FLAT in the pair for now.

To summarize, hourly cycles remain against USDX in all pairs in this group. However, the fact that pairs could get more sideways and even do double corrections suggests it’s best to stay FLAT in these pairs for now.

Yen Group:

USDJPY broke to new lows below 97.44 after sideways consolidation indicating cycle from 99.67 and 100.63 peaks was not over. While below 97.82, a test of 96.52 can’t be ruled out before buyers step in and lift the prices higher. Lack of momentum in the down move is clearly visible so we like longs in the pair as long as 95.77 low is in place. If that level breaks, triangle can expand further in the sense that we are still in wave ( C ) of the triangle. We don’t like selling the pair and strategy remains to buy the dips in 3, 7 and 11 swings at equal legs – 1.236 ext areas and risk for now is below 95.77 low.

GBPJPY failure just below 160.00 resulted in a break of 157.45 and 157.04 low suggesting pair is still in wave ( 4 ). Pair has hit C = 1.236 x A ext from 159.97 peak. However, some more weakness to 38.2 fib and Y = 1.618 x W @ 155.25 could still be tested to complete wave ( 4 ). We don’t like chasing weakness at current levels and strategy remains to buy the dips. Only a break below 50 fib (153.81) would make this drop too deep to be a wave ( 4 ) of the Ending Diagonal suggesting a cycle from 6.13.2013 may have already completed.

AUDJPY revised view suggests cycle from 105.45 ended @ 88.89 on 6.13.2013 and price action since then was a FLAT which has completed @ 94.52. This complete wave ( W ) of (( B )). Pair is trading lower in wave ( X ). While above 90.85, expect more upside toward 93.30 – 93.50 to complete wave B before pair turns lower again toward 89.45 (61.8 fib) to complete wave ( X ). Hourly cycles are positive so we don’t like selling the pair and strategy remains to buy the dips in 3, 7 and 11 swings as pair drops to new lows below 90.64.

To summarize, we don’t like selling yen pairs and strategy remains to buy the dips in 3, 7 and 11 swings with GBPJPY currently in the buy zone which extends lower to 155.21 and USDJPY most aggressive triangle view is valid above 95.77 low

Indices & Commodities:

$SPX500 revised view suggests Index is trading higher in an Ending Diagonal structure. Expect 1626 low to hold as per this view and more choppy upside in the Index toward 1800 area to complete wave  (( 3 )) of III. Shorter cycles suggest some more weakness toward 1651 – 1665 could still be seen to complete wave B of 3 of the Ending Diagonal and if seen should be a good place to get long for the next leg higher. Only a break of 1626 would expose 1603 from where Index should turn higher but this view is less likely to play out. We don’t like selling the Index and strategy remains to buy the dips as long as prices are above 1626 low.

$INDU (Dow Jones) revised view suggests Index has gone into a bullish running triangle consolidation when wave ( C ) is under way and is valid as long as price stays above 6.24.2013 (14549) low. Expect another push lower to 14820 which is 76.4 fib retracement of wave ( B ) as well before Index turns higher again. Hourly cycles remain positive so we don’t like selling the Index and strategy remains to buy the dips in 3, 7 and 11 swings.

$DAX broke below 8606 low to confirm a cycle from 8092 is over and Index is now correcting the rally from 8092 – 8772. 50 fib comes @ 8432 and 61.8 fib comes @ 8352. Index failed to reach these levels in the 1st attempt but looks like it’s going to get into a double correction and try to get to these levels again. Break of 8545 will add more conviction to this view and focus should then shift at 8416 – 8462  area to look for long positions.

FTSE has broken below 6386 low suggesting rally to 6658 was wave X and Index is still in wave ( B ). Short-term a test of 6520 can’t be ruled out but as the recovery proves corrective, we expect to see more downside toward  6275 – 6320 which, if seen, should offer a good opportunity to get long for next leg of the up trend. Hourly cycles remain positive so we don’t like selling the Index and would wait for a test of the above mentioned area to establish longs.  

$XAU/USD (Gold) recent price action suggests cycle from 1376 is over. However, we believe this only completed the 5th swing lower from 1434 peak. So after a corrective pull back to 1338 (61.8 fib), we expect to see more weakness in Gold toward 1246 (equal legs) target. Even though we expect more weakness in Gold as long as price is below 1376, we are not thrilled about shorting the metal unless of course it shows another 5 wave move lower from 1338 – 1348 area.

To summarize,  US Indices are doing a soft landing but FTSE broke below 6386 low so can now trade slightly lower to 6275 – 6300which is the next buying area. SPX500 and INDU longs are favoured as long as prices are trading above 1626 and 14549. DAX test of 8416 – 8462 should offer a good opportunity to get long for the next leg higher. Gold is in 6th swing from 1434 peak and while below 1376 is still expected to test 1245 area but we don’t like the shorts any more unless it shows a clear 5 wave decline from 1338 – 1348 region.

 

Conclusion:

EURUSD cycle from 1.2746 is mature and close to ending but while above 1.3457, we favour another extension higher toward 1.3770 before it starts a larger 3 wave pull back. Strategy is still to buy the dips. USDX is in bonus time but another leg lower to 79.20 is still possible to end the cycle from 84.75 when Index should start the larger 3 wave correction.  USDCHF is doing wave (( iv )) FLAT and while below 0.9165 should trade lower in wave  (( v )). GBPUSD strategy is to buy at the end of current 5 wave move which is expected to end between 1.5885 – 1.5900 as long as RSI divergence remains intact. Commodity currencies don’t have the clearest trading setups so we prefer to be on the sidelines for now. Yen group remains bullish and we like buying dips in 3, 7 and 11 swings to equal legs – 1.236 ext. USDJPY longs as per most aggressive triangle view is valid against 95.77 low. Indices are doing a soft landing and we favour longs as long as 1626 (SPX) and 14549 (INDU) lows are in place. 14820 and 1651 – 1665 are the area to look for longs. DAX is in a double correction and test of 8416 – 8462 should hold for more upside. FTSE is expected to hold 6275 – 6300 area for more upside and if seen, should be a good place to get long. Gold should ideally trade lower toward 1246 (equal legs) as it fails between 1338 – 1348 but we don’t like shorts unless it shows a clear 5 wave decline from 1338 – 1348 area.

 

 

Trade Safe  & Good Luck

Elliott Wave Forecast Team

 

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