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HARMONIC ELLIOTT WAVE

Monday, August 10, 2009

The Dollar’s upside should still be dominant today

While the report took a break I have kept my eye on the market and with the retracement levels I indicated last week having broken on Friday I am having to adjust my thoughts once again. The first impression was that the 1.4445 high turned the tables implying a complex correction and thus a return to the 1.3747 low. Indeed, it does look an inviting scenario. When I sat down this morning to go through the analysis I still think it possible but just as I was finding the correlation between EURUSD and USDCHF difficult to handle before the same is occurring once again.

However, I can see an alternative scenario for USDCHF but clearly until there has been a little more development in the current move that started on Friday I do feel a certain degree of caution is appropriate. Even when considering GBPUSD I could come up with the same scenario – that is a move back to the 1.5982 low but that is going to require the decline in GBPUSD to be more aggressive than that of EURUSD.

This does, therefore, provide a clue as price development continues and if GBPUSD tends to lag behind and relative support & resistance in the other two begins to break down then it will be necessary to adjust the outlook.

Equally, as the Dollar failed to weaken sufficiently against the Europeans in line with my initial reaction USDJPY rallied stronger than anticipated. I do feel there will be follow-through but there are two resistance areas that we’ll have to watch closely – around 98.20-30 and later 98.88.93 and maximum 99.51. The reactions at those areas, and specifically the initial 98.20-30 should hopefully provide insight to the extent of the next move.

Indeed, also keep in mind the JPY crosses. These still seem to have a little more to go on the topside but it does appear to be limited following which we should be looking for a fairly substantial correction. Now, whether this pullback will be driven by stronger European currencies (and AUDUSD) or by USDJPY is what we then need to watch. I feel it will be a bit of both but I’d like to see the momentum conditions of both sides to get a better feeling for how things will then develop.

AUDUSD and USDCAD are really complex right now. I will be very neutral on these and will be looking for a stronger indication of what is going on. Certainly, I feel that risk should be kept to a minimum on these two…

Today’s free analysis is for EURUSD and can be found on
http://www.fx-forecaster.com/DailyForecast.html.

Have a profitable week.
Ian Copsey

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