The euro / dollar remains in a range. Until this range is broken, there is little confidence in USD direction. There are signs that the USDCAD is reversing from below 1.30. Bearish potential is 1.15. The euro / dollar could still drop below 1.2330 in order to complete a 5th wave within a 5 wave decline from 1.6040 as an ending diagonal (not likely at this point). It is just as probable however that the pair pushes through 1.3302 in a larger recovery from 1.2330. Fibonacci resistance would begin at 1.36. Bottom line; the EURUSD remains in a range and there is little confidence in direction until that range breaks. It is worth noting that the rally from 1.2420 to 1.3085 appears impulsive (5 waves), which would favor bulls. However, that rally could be wave c of a flat within an ending diagonal. Staying bearish the USDJPY has proved a wise decision although the decline over the last month has been choppy. Still, I maintain that the larger USDJPY trend is down so strength should be sold. However, it remains unclear whether or not the rally from 90.86 is complete. As long as price remains below 96 (below the resistance line from early October), bearish potential is significant. The rally from 1.4554 is probably wave 4 of (3) (within a 5 wave decline from 2.1160). Resistance does not begin until 1.60 and there is potential for a move back to 1.67 (38.2% Fibonacci and October 30 high). 1.4554 ideally holds going forward. Higher highs and higher lows since the March low favors bulls as does the break above a line from 2002. The pair may be in for a sizeable decline over the next several weeks as price has reversed from the top side of a channel. The low side of that channel should provide support in late December. Another line to watch for potential support is the one that connects from the September 22 and October 30 lows. The rally from just below 1.15 is in 5 waves and could be a truncated 5th wave. If so, then a correction back to at least 1.15 and possibly lower is underway now. The drop from 1.2993 to 1.2120 is in 5 waves, which is bearish. Price should remain below 1.2993. There remains potential for a large recovery back to the mid .70s given the 5 wave drop from the top (waves a and b of an a-b-c correction would be close to complete). Bulls may attempt to ‘pick’ this bottom given that the AUDUSD has held above the October low. There is quintuple divergence with RSI on the daily NZDUSD chart, which warns of a reversal. Last Friday’s inside day reinforces the potential reversal to the upside. Staying above .5186 keeps the short term trend bullish.

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