Elliott wave and technical analysis on EUR/USD; USD/JPY; GBP/USD; USD/CAD; EUR/JPY and EUR/CHF

I will be staying in the currency world today.

There will be no updates next week, as I will be in Austria skiing.

EUR/USD - Tried to break above resistance at 131.35 yesterday, but failed. That doesn't mean that the top is in place, but the possibility has gone up considerably. Yesterdays candle was as close to a "Gravestone" candle as you get them, this is normally a topping candle, but it needs confirmation today in form of a red candle and the bigger the better.

Resistance is at 131.35; 132.45 and 133.35, while we have support at 130.30 and 129.30 a break below the later will add confidence to a possible top being in place yesterday and call for a new decline towards strong support in the 125.50 - 126.45 area. USD/JPY - I'm disappointed, that we have moved back below the long term falling trend line. That does leave the impression of a failure break, but as long as we don't break below support at 76.55. A break below support at 76.55 will leave us with no other possibility, than a decline back below 75.57 towards 74.00.

This is not my preferred scenario, which is a break above resistance at 78.35 and more importantly 78.85, which should open up the upside for a continuation towards 82.50 as first target.GBP/USD - Tested resistance yesterday. We could see the retracement from 152.33 move higher towards 158.60, but I would not at all be surprised if resistance at 157.45 protects the upside for a break below 155.30 calling for the next powerful decline below 152.33.

Wave ii of 3 has clearly become an expanded flat, where wave "b" was 1.382 time wave "a" and wave "c" is 1.618 time wave "a" and at the same time we are testing the top of red wave iv of one lessor degree.USD/CAD - Almost made it to the support I mentioned yesterday. At the same time we can see the fighting with the mid-point of the falling channel, which has formed since late November 2011. It's way to early to call for a bottom. We could easily see a firmer test of support at 99.56 and possibly even a decline towards 98.88, before a bottom is in place.EUR/JPY - The Elliott wave count shown is my preferred count for this cross. I do think we are very close to a bottom, but we need more evidence in form of a break above the minor resistance line at 105.50. That said I still think, the risk/reward buying EUR and shorting JPY within the 99.00 - 100.00 area is well worth taking, with a stop just below 97.00.

EUR/CHF - Is just above the floor, that the Swiss central bank (SNB) has defined at 120.00. I would not hesitate one second taking a long EUR short CHF position here. The former head of the Swiss central bank, Hildebrandt, was forced to leave his position, but I'm sure that hasn't changed the position of the board and they will defend the floor viciously. Therefore this is a very low risk high reward possibility, with a stop placed just below 120 say 119.50.

Longer term I looking for a rally higher towards the 128 - 129 area.

One final thing. I do like TRY very much right now. We have already seen a major double top activated in EUR/TRY (see my post here:

http://theelliottwavesufer.blogspot.com/2012/01/elliott-wave-analysis-on-eurtry.html)
In TRY/JPY we might soon see a double bottom activated (see my post here: http://theelliottwavesufer.blogspot.com/2012/01/elliott-wave-analysis-on-tryjpy.html)
CHF/TRY should also represent nice opportunities. I haven't done any analysis on this cross, but if the CHF will weaken from EUR/CHF 120 and I think EUR/TRY will drop to the 221 area, then CHF/TRY should do very well.

Remember that the interest rate in favor of TRY alone makes these crosses attractive and now that the trend is in favor of TRY too these crosses are very attractive

Elliott wave and technical analysis of the USD-Index; EUR/USD; USD/CAD; EUR/TRY; VIX; DJI; S&P 500; CRB; Gold; Copper and Crude oil

The FOMC announced yesterday, that interest rates might stay at exceptionnel low levels to 2014. They didn't say, that they will keep them low or for that sake not raise them if inflation begins to pick up. But the financial markets interpreted the statement as they will hold them at 0 - 0.25% until 2014 and that pushed the the risk-scenario to the forefront.

As long as the financial markets sees it this way the risk is, that risky assets will rally higher, but we are not yet quite out of the woods, so regard the price-action today and tomorrow carefully.

USD Index - is now testing the neckline support, The MACD-indicator is at the zero line, this is make it or break it time. If we break below here we will be looking at a deeper decline towards 76.40, but remember we need a break.

The other side of the equation is a break above the steep minor resistance line at 80.00 and more importantly a break above 80.35, that would call for a new rally towards 81.78 again as possibly higher.EUR/USD - Here we are at resistance at 131.35, which needs to hold to avoid a continuation higher towards the next resistance at 133.35.

If however 131.35 holds for a break below 130.30 and more importantly 129.30 we should see a new decline towards strong support in the 125.50 - 126.45 area. USD/CAD - My "X" wave triangle got creamed yesterday and we are most likely looking at some kind of double zig-zag, that should at least reach 99.56, but the risk is a continuation towards 98.88 and 97.20 if the risk-scenario plays out.EUR/TRY - Is tracing out a nice little bear-flag and when it breaks out to the downside we will see the next decline towards the double top target near 221.25.VIX Index - Spiked outside the lower Bollinger Band again, but closed inside the Bollinger Bands again. Take care as we are setting up a sudden trend-reversal. Wedge resistance at 21.50 is key for the next rally higher.

S&P 500 - is right at its 2007 and 2011 highs resistance-line. We apexed yesterday calling for a potential top here at 1,326. Maybe the financial markets realises that the misinterpreted the FED yesterday?

Dow Jones Industrial - We are back at resistance at 12,751. As long as this resistance stays intact I'm still looking for a break below support at 12,500 to confirm the top and the next decline lower.

However risk is clearly a break above 12,751, which will open for a rally higher towards 12,807.

CRB Index - Closed right at its resistance at 316.30. As I said yesterday a clear break above here will open for a continuation higher towards the 339 area (risk-scenario). While a break below 309 and more importantly 306.80 is needed to invalidate further upside progress and call for a decline back towards support near 293.65.

Gold - Shoot up through resistance, which has opened for a continuation towards the next resistance at 1,761 and maybe 1,802.

We also move back into the raising channel back from late 2008, which is bullish, but remember this is a monthly chart (see below), so the final call is still out in the open.

Gold Monthly

Copper - Here too we keep climbing, which points towards a more risk-on behavior, but copper is heavily overbought, so we have to tread carefully up here.

Crude oil - Is holde below the broken support line on acting as resistance, but we need a break below 97.40 to take of the upside pressure and a call for a deeper decline towards 92.54 and likely lower.

A break back above 101 will call for a new test of resistance near 103.40 and probably higher near 106.40.

Sorry for being a bit twisted today, but we are right at an important cross-road, which can lead both ways...

Elliott wave analysis on TRY/JPY

TRY/JPY - Due to my prior call for the TRY to rally against EUR, the break above the long term trend line resistance in USD/JPY gave me the idea, that this potentially could be an interesting cross.

As can be seen on the chart above, we can count a five wave decline since the 98.70 high back in October 2007. Wave 5 down turned into an expanding diagonal, where we have some interesting relationships between wave i - iii and v as wave v became almost exactly equal in length to wave

i-iii. At the same time wave v also became 1.618 time longer than wave iii adding confidence in the possible double bottom scenario.

I'm looking for a test of the double bottom neckline resistance at 44.55 soon and if this resistance breaks we will be looking for a continuation towards at least 48.65, but longer term we should be looking for a rally into the area between 54 and 65.

The interest differential between TRY and JPY in the favor of TRY does make this a very nice cross to stay with for the longer term.

Elliott wave and technical analysis on the USD-Index; EUR/USD; USD/JPY; VIX-index; DJI; SP500; CRB-Index; Gold and Crude oil

USD Index - I'm still looking for the neckline support near 79.25 to protect the downside for a new rally higher towards 82.60 and 87.50 later on.
However the risk is of cause a clear break below the neckline support, which will delay the upside progress and call for a decline towards support near 76.40 before the next rally higher.

EUR/USD - We are currently testing the resistance area between 130.85 - 131.35, which I expect will hold for the next decline towards strong support near 125.50. Long term I still prefer a much deeper decline, but as long as support at 125.50 hasn't given away this is only speculations.

The short term risk is a break above 131.35, which will call for a continuation higher towards 133.35 the former neckline support, which has now turned into resistance.

USD/JPY - We finally got the break above the long term falling trend line resistance near 77.50 and we should see a test of the neckline resistance near 78.85 and a break above here will confirm the next rally towards 82.80.

In the bigger picture we should now have seen an important bottom at 75.57 (the call is still a bit early...) and a rally back towards the apex near 115 should be see.

VIX index - We now have a second close within the Bollinger Band, which confirms the test of 18.16 as being the bottom. We should soon see the mid-band near 21.13 and wedge resistance near 22.16 broken for a move higher towards 24.40 and 26.40 as the next resistance points.

Dow Jones Industrial - We have seen a small throw over and resistance at 12,752 cap the rally from 11,231. However we need a break below 12,500 to confirm the top and call for renewed downside pressure towards support at 11,231 again and longer term even lower towards the neckline support near 10,600.

Be aware of a clear break above 12,752 as that would confirm the underlying uptrend and call for a continuation higher towards 12,807 as the next resistance.

S&P 500 - We will be meeting the Apex of the "Triangle" formation today and this often marks the top of the triangle-thrust. We can also see, the the rising supports are broken one by one and risk clearly is turning to the downside. Be alert up here, but only a break below 1,300 will add value to the call for a top.

In the bigger picture (see the chart below) we haven't seen the resistance-line from the 2007 high and 2011 high broken as is the case with the DJI-Index, this should be a warning too.

Risk of cause is a clear break above the long term resistance line at 1,328, which would call for a continuation higher towards the 1,335 - 1,340 area.

S&P 500 Weekly

CRB Index - Is at double resistance again. I still favor this double resistance to protect further upside progress and a break below 309 and more importantly 306.80, which will invalidate the possible inverted S/H/S formation which has been building since November 2011. For this formation to be activated it will take a break above neckline resistance at 316.15. A break above 316.15 (not the preferred outcome) will call for a continuation higher towards 339.

Gold - Here too we have see double resistance at 1,681 protect the upside, but we need a break below 1,644 to confirm the top and a call for a decline back towards the neckline support near 1,520. The risk is of cause a break above 1,681 that would call for a rally higher towards 1,750 and 1,800 and possibly even higher longer term.

Crude oil - Has broken below the rising support line since October 2011. Risk is again turning towards the downside, but we need a break below support at 97.40 and more importantly 92.52 to confirm the next big decline towards 75.

Risk is of cause a break above 103.40 and more importantly the resistance line near 106.40, that would call for a rally back towards the 114 - 115 area.

Elliott wave and technical analysis on the USD-Index: EUR/USD; VIX-Index; DJI; TLT; Gold and Crude oil

USD Index - Is once again testing the strong neckline support near 79.25. The price action following this test will tell us a lot about the future for USD. I still expect this support to provide a springboard for the next rally in the USD, but we will have to see what happens down here.

EUR/USD - Should the EUR be stronger than the USD? At this point I don't think so. However every time the EU seems to finally reach a solution to a problem, this time it's Greece and the private investor haircut, the EUR rallies, but new troubles is already stirring at the EU and ECB. This time it's Portugal. The 10-Y yield is at all time high near Portuguese (see the chart just below).

EUR/USD is sitting just below strong resistance in the 130.85 - 131.35 area, which I expect will hold for a break below 128.69, that will confirm renewed downside pressure.

If however resistance at 131 unexpectedly breaks we would be headed for 132.35.

10 Y Portuguese bond yield.

VIX Index - Closed back into the Bollinger Band and we could have a bottom in place for a break above ending diagonal (wedge) resistance line near 22.15. A break above 22.15 will call for a rally higher towards 34.74.

However as long as we stay below 21.24 and more importantly 22.15 we must accept the possibility of a new low below 28.16, but there isn't much more room to the downside.

Dow Jones Industrial - Tested resistance at 12.751, but couldn't break it. Wave c of Y is now equal in length to wave a of Y also raising the potential of a top being close at hand. You know I think this rally is unsustainable, but as long as support at 12,463 and more importantly 12,311 isn't broken we must accept that the trend is up.

10 Y U.S Bonds (TLT) - After some indecision it finally seems as we are headed towards support near 109.80 (see my post from January 4'th here: http://theelliottwavesufer.blogspot.com/2012/01/elliott-wave-and-technical-analysis-on_04.html)

A break below 109,80 will call for a much deeper decline.

Gold - Is testing double resistance in this area. I still think the resistance near 1,680 will protect the upside for a clear break below 1,644 and more importantly 1,625, which would call for a new decline towards strong support near 1,520.

A clear break above 1,680 will call for a new rally towards 1,920 and possibly 2,036.

Crude oil - Is attempting a break out. We need to see some follow through, but I will be looking for a decline towards 92.52 if we break below 98.70 and more importantly 97.40. The really big test will be if we can manage a break below 92.52, which would call for a decline towards the neckline support near 77.50.

Risk is still a break above the resistance area between 103.75 - 104.75 and more importantly 106.50 which would call for a new rally towards the 114 - 115 area.

Elliott wave on the Vix-index; DJI; DJT and S&P 500

Lets stay a little with the U.S. stock indices today.
I have been quite puzzled with the continued strength of these markets. The last time I saw something like this, was when FED orchestrated its QE 1 (it was not as extreme the second time around). All indicators was flashing the red light, but stock indices kept going up. It's is same this time around, but this time it's not FED doing the QE, this time it's QE European style orchestrated by ECB and the LTRO-program. These programs might do the job in the beginning, but they never last and when turn comes, and believe me it will come, the decline will just be much faster and deeper than it else would have been.
Lets look at some charts and see what red lights we have flashing.

VIX Index - We are now in the low 18 area as expected Friday. More important we broke and closed below the lower Bollinger Band, which is a warning of an imminent bottom of some kind. We still need a clear break above the wedge resistance-line near 22.50 to confirm an important bottom in place and a return to 34.75.Dow Jones Industrial - Took out resistance at 12.660 with trouble at all. That of cause should be of concern and might force us higher towards 12,762 as first target and maybe even higher towards 12,754 and 12,876, but be careful if we break back below former resistance at 12,660 as the break could have been a failure-break.
However we need a break below 12,463 and more importantly 12,311 to confirm, that an important top is in place for a much deeper decline.

Dow Jones Transportation - Here too a large Should-Head-Shoulder top is forming. We might see a move slightly higher towards 5,387, but any break below former resistance now support at 5,066 will be a warning, that an important top is in place and a decline towards the neckline support near 3,975 might be developing.

S&P 500 - Haven't broken above its resistance line from late 2007 to mid-2011 yet. I doubt it will, but we must respect the uptrend for now. That said a break below support at 1,293 will indicate, that an important top is in place for a much deeper decline towards the neckline support near 1,100 longer term.

The triangle shape marked by the black lines will apex (the two lines meet) within the next couple of days, that often marks the end of a move.

Elliott wave and technical analysis on USD-Index; EUR/USD; USD/JPY; VIX-Index; DJI; Shanghai Comp.; Junk-Bonds; Gold and Crude oil

You might have noticed that, an "Unknown" reader has had some issues with my analysis always being wrong. I surely hope they are not, but I just wanted you all to know, that you always are welcome to comment on whatever I'm writing. I might have overlooked something and a dialog is always nicer than a monologue.
So feel free to comment, but not only when you dislike what I'm doing, that adds nothing of value to me or you for that matter. Have a great weekend.
USD Index - Broken below a rising channel (just as Unknown wrote yesterday), which happens to be more or less equivalent to the break above 128.80 in EUR/USD. That means an other test of the neckline support near 79.25 (near 131 in EUR/USD) is in the cards. I still think this support will hold for a new rally towards the inverted S/H/S formations target near 82.60.

EUR/USD - To my surprise we broke above resistance at 128.80, which calls for a move closer to resistance in the 130.85 - 131 area. The major Pitchfork I have showed a couple of times worked again. Support at 125.50 (not quite tested) held but I do expect, that we will have a new test of this support area, after the minor rally towards the 130.85 - 131 area.

USD/JPY - Is working on a new challenge of the long term falling downtrend line. This downtrend needs to be broken to call the test of 75.57 an important bottom and a rally towards 82.85 as first target, but longer term we would be looking at much higher targets. The risk is, that the downtrend once again does its job and turn USD/JPY down for a break below 76.50, which would call for a decline closer to 74.00.VIX Index - Here too the ending diagonal resistance line turn us down for a new low, and we could see a move even lower towards the low 18 area, but any break above the resistance line and resistance at 23.44 will call for a rally back towards at least 34.75 and probably even higher.

Dow Jones Industrial - Is at the ultimate decision point. We have resistance from the 2007 and 2011 high coming in. We have a wedge formation, which normally have 2/3 chance of coming through and finally divergence on the MACD-indicator. I do think those odds favor a top soon and a break below 12,474 and more importantly 12,311 for a decline back towards the neckline support (pink). However risk of cause is a clear break above resistance here calling for a new rally towards the May 2011 high at 12,876.

To me this poses a low risk selling opportunity here with a very tight stop at 12,675. It doesn't come much better than this.

Shanghai Composite - Is headed for resistance at 2,372, which is where wave c of 2 will equal wave a of 2 and we have multiple resistance here. Once this resistance is tested I would look for renewed downside pressure.

Junk Bond (JNK) - Is at a major decision point. I expect resistance at 39.10 to hold for a break below support at 38.50 for the next decline towards the mid-32 area. However a break above 39.10 will lift us up to the next resistance at 39.60, but I still regard the upside as limited.

Gold - Resistance in the 1,670 - 1,680 area seem to be to much for gold to handle for now. I still expect a break below support at 1,629 soon to confirm a new decline towards the strong neckline support near 1,520. Only a clear break above 1,680 will lift the spirit a call for a rally towards the 1,780 - 1,795 area at least, but that is not my preferred view at this point.

Crude oil - Is trapped between support at 97.70 and resistance at 103.50. I still favor a downside resolution, but is clearly aware of the risk of a break above 103.50 and more importantly a break above long term resistance line at 106.65, which will open up the upside completely.

However as I said I'm looking for a downside resolution with a break below 99.40 and more importantly 97.70 calling for a new decline towards 92.50 again.