CAD, AUD, CRB Index Piling Up Against USD | RJO Futures

May 22, 2017 9:09AM CDT

USDCAD

Fri and today's continuation of the past couple weeks' slide reinforces our broader peak/reversal count introduced in 08-May's Technical Webcast and short recommendation from 1.3750 OB and leaves Thur's 1.3671 high in its wake as the latest smaller-degree corrective high the market is now minimally required to recoup to threaten this call. Per such 1.3671 becomes our new short-term risk parameter for a still-advised bearish policy and exposure for shorter-term traders with tighter risk profiles.

Former 1.3575-area support is considered new near-term resistance ahead of further and possibly extensive USD losses straight away.

Canada Dollar 240 min Chart

Canada Dollar Daily Chart

A cornerstone of our peak/reversal count that could be major in scope is the contrary opinion fact that our RJO Bullish Sentiment Index of the CAD futures has been wafting around historically low levels for the past couple months. Fri's latest 22% reading reflects just 33K Managed Money long positions to a whopping 114K shorts that provides tremendous fuel for upside vulnerability in the contract and downside vulnerability in USDCAD.

The USD's gross failure to sustain late-Apr's breakout above FIVE MONTHS of former 1.3600-area resistance stems Feb-May's rally enough to render market sentiment an applicable technical tool in navigating a major peak/reversal-threat environment. On this major scale 05-May's 1.3794 high serves as the END of at least the rally from 13-Apr's 1.3223 low and possibly from 31-Jan's 1.2969 low and our new long-term risk parameter this market needs to recoup to negate our long-term bearish count.

Canada Dollar Weekly Chart

Finally, from a very long-term perspective shown in the monthly log scale chart below, it's not hard to envision the entire rally from Sep'12's 0.9632 low as a complete 5-wave Elliott sequence, with Jan-May'16's 1.4691 - 1.2460 plunge just the INITIAL A- or 1st-Wave of a major correction or reversal lower. And while the ensuing recovery attempt came within a couple days of spanning a full year, this 1.2460 - 1.3794 rebound was about as labored and corrective as it gets, falling less than half a figure from the (1.3839) 61.8% retrace of Jan-May'16's 1.4691 - 1.2460 plunge.

If correct, this count calls for not only lower prices, but sharp, sustained, even relentless losses in the months ahead to eventual levels below May'16's 1.2460 low. These issues considered, a bearish policy and exposure remain advised with strength above at least 1.3671 required to threaten this call. In lieu of such strength further and possibly accelerated losses remain expected straight away.

Canada Dollar Monthly Chart

 

AUDUSD

Australia Dollar Weekly Chart

 

We've been generally bearish the USD against the EUR and GBP for most of this year, with the commodity currencies (CAD and AUD) somewhat the exceptions, until now. Especially given our peak/reversal count in USDCAD, we find it just as compelling that following Jan-Apr'16's initial counter trend rally from 0.6862 to 0.7722, the AUDUSD has only been able to relapse in a clear 3-wave structure on a weekly log scale close-only basis above that stalled within two pips of the (0.7179) 61.8% retrace of last year's early rally. Left unaltered by a relapse below late-Dec's 0.7181 weekly low close, Apr-Dec'16's 3-wave relapse attempt is considered a corrective affair that warns of a resumption of Jan-Apr'16's uptrend that preceded it.

It's also interesting to note that the major decline from Jul'11's 1.1083 high came within half a figure of 2008's preceding 0.9850 - 0.6010 collapse. These issues considered, we believe the AUDUSD is poised for a resumption of early-2016's rally to eventual and potentially significant new highs above the 0.77-to-0.78-handle highs that capped the market in Apr last year.

Australia Dollar Monthly Chart

 

CRB INDEX

If the CAD and AUD are all of a sudden looking sweet technically, it begs the question of higher commodity prices. By virtue of today's clear break above 01-May's 413.81 corrective high detailed in the daily log scale chart below, the CRB Index has confirmed a bullish divergence in momentum. This mo failure defines 04-May's 402.77 low as the END of the decline from at least 17-Jan's 436.14 low and a hugely important risk parameter from which all non-bearish decisions like short-covers and new bullish punts can be objectively based and managed.

Additionally however, the broader sell-off attempt from Jul'16's 438.22 high looks to be a textbook 3-wave affair as labeled. Left unaltered by weakness below 402.77, thus 3-wave decline may be considered a corrective/consolidative decline that warns of a resumption of early-2016's 351.87 - 438.22 rally that preceded it. And the Fibonacci fact that this entire decline stalled at the exact (402.97) 38.2% retrace of early-16's rally would seem to reinforce this broader bullish count.

Commodity Index Daily Chart

Commodity Index Weekly Chart

Taking a big step back to consider this market's long-term history, it's interesting to note that the past 16 months' basing behavior stems from a Jan'16 351.87 low that falls in the immediate vicinity of the (355.3) 50% retrace of 1999 - 2011's 182.67 - 691.09 rally AND the (361.6) 1.000 progression of 2008's 615.04 - 322.53 collapse from Apr'11's 691.09 high. These Fibonacci relationships combined with early-2016's bullish divergence in weekly mo and the past 10 months' 3-wave corrective setback conspire on a base/reversal environment in the CRB Index that could be major in scope, calling for higher Index levels for quarters or even years ahead. The commodity sector culprits for such a rally could be energies, metals, livestock and, eventually the grains.

In sum, we believe the CRB Index is resuming its early-2016 uptrend that could see steep, sustained, even multi-year gains straight away with a failure below 402.77 required to negate this call.

Commodity Index Quarterly Chart

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