USD: possible targets

Short term EUR/USD

The final version of the summer corrective rally is shown bellow. Nothing new, except that the C wave of the correction has developed as a zig zag and not a  5 I've been looking for.  As for me, that had a cost of about 100 pips of missed profit.
So, now, I'm pretty sure that we've entered the 3d minute wave down with the target of at least 1.215. The crossing of 1.2587 will confirm the move and if ever we manage to bounce back ant take the 1.2922 resistance we shouldn't go higher than 1.31 level.

An important junction on EUR/USD

EUR/USD is approaching an important junction, shown on the chart. The upper trend line before we crashed in May's panic and the 38% retrace of the entire move from 1.515 to 1.188. Moreover this resistance level is consistent with my  short term Elliott Wave count.

As for the US index that level of  EUR/USD will give 81.2-81.4 that is a 50%  correction of the whole index's move from November '09 lows to June's '10 highs.

Short term EUR/USD. Update.

The 3d of the C was a shortened one, we didn't reach what could be called a "~1.31" level. Then the parallel trend line was busted, but we didn't reach the level of the 1st of C, that gives a possibility to go a bit higher, say to 1.31 or some more. The RSI should not confirm that move.

Short term EUR/USD

So, no surprise, we're in the red scenario. I should recognize, it's a bit more rapid than I would have expected, but never mind, the corrections are always fast and furious. And we've just passed the strongest part of it - the 3d of the 3d of the C.
The count and the projections are shown on the chart:

Possibilities

It's quiet difficult to say at the moment what are we correcting in EUR/USD. Is it the whole move started in late November '09, or rather just its crashing part of April-May. That's why, I include 2 wave counts:

 Looking at other European currencies, doesn't give much more clarification. In any case the pound seems to be close to the end of its correction, whatever it eventually is.

And as for the swiss frank, it's clear that we're correcting the entire move, but that doesn't mean, the next move up will hit the new highs. The dollar may easily put new cyclical highs versus pound and euro without doing so versus frank, if, of course, we follow the green count on the EUR/USD.

Medium term projection for EUR/USD

The following projection of EUR/USD behavior considers that the correction of the first wave down in the US equity markets will be done by mid or end of July. The August, in this case, will be really hot with the 3d wave down for the equities and the 5th for the euro.

Is the final capitulation on euro still ahead?

I think the set-up is quiet good for the final capitulation on the euro. On EUR/USD that should be at around 1.175-1.18

The risk is back

Market has tried to rally and was sold in a controlled manner during the second part of the yesterday's  session. But looking in the details one will remark that risk is starting to enter by a small door. Small caps were clear performers. Commodity currencies were strong as well as East European ones. The implied volatility as well as it expectation (VXX and contracts on VIX) were about unchanged.
As for the moment I'd expect  one more close near the recent lows for the broad US indexes as well as for other risk plays (EUR/JPY, EUR/CHF) before we start the summer risk rally.

Expanding triangle as a terminal wave on EUR/USD?

As for the cable, we should avoid to make  new lows:

The setup for EUR/USD is good

By establishing the double bottom at around 1.215  EUR/USD confirms my positive opinion and EW count and validates the target of 1.32+ in coming weeks. This target is confirmed as well by the price action in  GPB/USD and equities.

Commodities priced in euro are breaking down as well

Well, the euro seems to be stabilizing. May be some more days of shaking out  weak hands, and we will  climb higher, toward, at least, 1.32-35.
One of the tings supporting the single currency, I see, is the beginning of the commodities decline. The CRB priced in euro has rolled over, just as it did before in USD:

Good bye, carry trade!

Euro has finally started to show some resiliency after yesterday's rally.  Isn't surprising?
The chart of EUR/AUD is speaking by its self:

Current EW count for EUR/USD

Is it it?

Great news, they have finally did it! Great news for the Euro bears in the long run, but a bit of pain for the moment. May be, again until 1.3850.
Meantime AUD/USD has flashed a big sell signal this morning dropping after a gap up  in the clear 5-wave pattern. We have missed by 16 pips  the Nov' 09 recovery high. Is it the end? Will AUD be joined by its peers CAD and silver in coming days?

Current EW count for EUR/USD

The previous call about 5th wave has been wrong. Instead, we have entered  something what could be called 3d minute wave, which seems to be about done. In any case the upside is capped by the 1.338.

EUR/USD: Now, take a deep breadth

The EUR/USD move (toward 1.3406) this morning wasn't confirmed by other currencies neither precious metals. Looking closely at wave structure I consider the 1.34 as a very likely bottom of the 1st minute wave of 5th intermediate (1st primary). The target rage for the correction's end should be within 1.355-1.369.

Correction is about over?

The correction which has started last Friday has a good chance to finish today. My target for SPX is 1083 and for NDX 1785. EUR/USD continue to be weak, confirming my previous call on euro. The next week should be strong on the downside for all risky assets.

A possible path for EUR/USD

After breaking down a 1.375 support EUR/USD has signaled the change in the long term trend. We can consider that 1.2 level will be reached before we will see 1.45.

Don't wake a hungry bear!

I should note that equity market was greatly prepared for the yesterday's sell-off.
From the technical point of view, we have passed the 10 months time frame, which is 62% duration of the previous bear market.
Fundamentally, we're in the 3rd quarter of upbeat earning reports and given the 60%+ rally, the cost reducing efforts of US companies are at present more than fully discounted by the market.  What we need to hold, not speaking about  the rise, is the growth of sales, that means a real, consumer driven recovery. But the unemployment, which is rising along with cost cutting programs, can't provide any confidence to the consumers.

On the political front, Democrats have lost an important election, and it's not a good thing in the mid-term elections year. That's why in order to gain some popularity, Obama has to do things which will please its voters. And what else will be more popular than an exemplar punishment of the authors of the current crisis. The same who were responsible during decades for pumping money in to the system. All this is deflationary and mister market feels it.

On the short term charts I've got an impression that we need, at least, one more wave down for SPX as well as for NASDAQ. Moreover, it's highly probable that one of these indexes if not both has put its top in.

And, in my opinion, we have a similar situation with currencies. In order to complete the pattern EUR/USD has to plunge one more time, probably toward 1.38.
In any case, we're only at the beginning of the second (3d in Elliott Waves terms) wave of dollar appreciation.