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HARMONIC ELLIOTT WAVE

Monday, August 31, 2009

USDJPY has further to go on the downside but there is a pullback to be seen first

The first move the Dollar made against the Europeans summed up the rest of the day, at least against in EURUSD and USDCHF. This should imply the former should retest the 1.4208 low while ideally USDCHF should reach the 1.0713-18 area again – but progress has been slow here so that leaves a small question mark. It in no way changes the underlying Dollar bearish view for the next 2-3 weeks and once these corrections are complete I’ll be looking for that trend to resume.

GBPUSD was a little different and may have done enough to generate a larger reversal. The initial risk today is lower and as long as it remains above the 1.6153 low I feel it should have turned the corner for a rally. However, it could well be that this morning’s decline could push that low quite hard. At a minimum I see 1.6195 and at most 1.6169 so this presents a crucial pivotal area between bullish & bearish today.

The biggest mover this morning has been USDJPY – not that it was particularly strong, but in the right direction for continued losses. The rally to 94.07 on Friday did renew in my mind the possibility of a larger reversal higher but it just could sustain that strength and this morning’s retest of the 93.21 low should bare pretty soon with a move down to around 92.18 and later to 91.70-74. Take care here.

That still leaves the JPY crosses a bit mixed though the emphasis with an initially bearish EURUSD and USDJPY does seem to imply further losses in the short term. Quite how all this will develop is a bit uncertain in my mind as I see a fair degree of ambiguity across the three pairs and given price movement recently has been pretty choppy it does suggest a complex correction. The problem I have here is that there are several potential outcomes and it’s still a case of wait & see until the pattern reveals itself.

AUDUSD broke higher but needs to renew the uptrend pretty quick to avoid a slightly deeper pullback. USDCAD may well have topped out at 1.0954 this morning – the downside still the greater risk for a test down at 1.0740-50 before higher.

Today’s free analysis is for AUDJPY and can be found on http://www.fx-forecaster.com/DailyForecast.html along with Friday’s trade set ups (110 pips).

Have a profitable week.
Ian Copsey

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