By Ric Spooner, Chief Market Analyst, CMC Markets Australia The US dollar correction is a major driver for world markets at the moment. Here are some thoughts on key levels for this correction. With this type of situation it can pay to scan different markets and consider both bullish and bearish scenarios. In this note, I will take a look at the Japanese Yen, Aussie Dollar and Crude Oil West Texas relative to the US Dollar. Dollar Yen key support levels. I’ve used the the Yen to look at chart levels for an idea of how far the current correction in $US might go. Euro US is of course the major market but the trend here has been so strong that key levels are still quite distant at this stage. For me, the key support in USDJPY is the dashed purple line around 115.56. A clear break below this would confirm a large double top formation. In Elliot Wave terms this double top could also be a large “flat correction”. This could signal the end of the big 5 wave advance that started below 101. This could potentially mean a major US dollar correction with big picture implications for other markets (e.g bullish commodities) The most immediate support is right where we are now in the shape of a rising channel. A bounce off this level could see a rally back towards the channel resistance. However, horizontal support is usually more reliable than trend lines like the channel, especially when the trend line has so far only been respected twice. On that basis if we break the channel support, I will be watching the thin red horizontal line around 118.4. This has done a good job at stopping USDJPY as both support and resistance over the past couple of months Source: CMC Markets Aussie Dollar and possible USD weakness Aussie Dollar is a chart I am keeping an eye on in a potential weak US Dollar scenario China’s weaker than expected Flash PMI reading has seen the Aussie back off what could be a key level at .7913 so far today. This was the high on 26 Feb. The 55 day moving average is also just under this level. This is the first time the Aussie has been back to its 55 day moving average since September. A couple of other things look significant about this chart. First, I’ve had a go at an Elliot wave interpretation of the Aussie Dollar downtrend as well. I’ve labeled a possible 5 wave decline on the chart. A move above .7913 would be a break above “4”. If this is right, a break above “4” would signify a significant upward correction of the whole 5 wave decline. What also interests me is that the RSI in the box below the chart is already making higher lows and higher highs. Based on this, I am looking for short term set ups based on pull backs in shorter term time frame charts like the one hour chart to buy into Aussie, even before it breaks this .7913 resistance. Source: CMC Markets US crude oil and possible USD strength If the USD correction ends soon, crude oil may become more active again . The overall trend in US crude remains down at this stage but it’s approaching resistance. If the downward correction in UDS starts to fail, oil has a good chance of resuming its decline. Price continues to make lower lows and lower highs as outlined on the chart. The 10, 20 and 50 day moving averages are bearishly aligned (10 lowest, 20 in the middle and 50 highest). There are also gaps between the averages suggesting ongoing weakness Oil has pulled back into the averages and is approaching the resistance of old support represented by the dashed line. So if oil stays under this resistance and starts to move lower in the next few days, the downtrend looks likely to resume. A sign of weakness to watch for would be a minor trend peak followed by a move below the previous day’s candle A peak in the RSI in the near future would have it making lower highs supporting the outlook for an ongoing downtrend in price. A move below short term high in the RSI, I’ve labelled with a small red “h” would be a sign of potential weakness. Source: CMC Markets