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HARMONIC ELLIOTT WAVE

Thursday, February 25, 2010

The deeper correction looks less likely but direct Dollar gains are not yet a foregone conclusion

Yesterday demonstrated that we need to invent a coin with three sides… One side needs a bull mark, one needs a bear mark and the third needs a sleeping cow…

I had expected to end up Dollar bullish today. If we had just a two-sided coin that would be where I’d place a bet but there are just a few indications that suggest that things still aren’t that simple. However what must be remembered is that the underlying picture is Dollar bullish so be ready to jump a ride if this is confirmed.

What I am slightly concerned about is the daily Dollar bearish divergences still and there is the odd chance that we could see an extended flat correction. Therefore, until the Dollar highs are broken (and allow for a few pips overshoot) there is the contrarian view that could generate a pullback right back to the Dollar lows seen this week…

Where there is a great risk is in USDJPY and its crosses. Be aware that any loss of yesterday’s 89.76 low would open up a big hole and there isn’t a great deal of support until it hits the 88.33-76 area. Even then it should only be for a correction.

The implication for the crosses is evident and if the Dollar does break up against the Europeans then we could see some fireworks on the crosses.

All in all, what it does mean is that until there are stronger indications we are going to have to curb any immediate Dollar bullish views until the Dollar highs are firmly taken out. I may be completely wrong but then we’ll get breach of those highs and it’ll be obvious. Until then, I feel that rather than observing the highlighted support & resistance it would be better to consider each level independently and look for trades on patterns around them.

If a move doesn’t look like it’s going to work out… watch out for the sleeping cow…

Today’s free analysis is for AUDJPY and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & trade Set up report (+75 pips).

Good luck
Ian Copsey

FX-forecaster Trader Package now available at €20.00 pm
For MT4 users

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