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HARMONIC ELLIOTT WAVE

Wednesday, March 3, 2010

The Dollar appears to be recycling the correction against the Europeans

All looked well for a while yesterday, the Dollar pushing up higher and even forcing a marginal new low in EURUSD but then completely reversed. I am treating this more as a recycling of the overall correction and should therefore imply a test around the 1.3687 high in EURUSD and potentially the 1.0665-95 area in USDCHF.

However, there is one possible “catch” to this scenario as a break above the 1.3687 high would actually confirm a double bottom. We’ll have to treat this with care and just ensure that the shorter time frames confirm a bearish divergence at that area for any significant breach it could set off a string of stop loss orders that could provoke quite a strong follow-through – and remember the Dollar bearish divergences in EURUSD and USDCHF daily charts…

I’m still hanging my hat on a resumption of the uptrend and while the start may be a little choppy it does still seem to be the more logical implication.

The renewed strength in EURUSD is providing GBPUSD with a new lease of life… but probably only a short term lease… I had mentioned yesterday that I felt the ideal was for a slightly deeper pullback and this seems to be playing through. While 1.5170-80 caps the downtrend still remains in place.

Watch USDJPY as this appears now to be setting itself up for a more decisive reaction. The 88.33 area is the crucial support and while it holds (with a solid bullish divergence in the 4 hour chart) it could generate a more sustainable correction. Much below 88.30 and the scenario will turn itself on its head and extend losses by over 100 pips…

Finally, just to cover the JPY crosses – well, it all rests on the shoulders of USDJPY really. I am more bearish in the medium term but there’s sufficient choppiness to suggest we may still be in the midst of a correction. Once they break lower then the move should accelerate but until that point take care.

Today’s free analysis is for EURUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & trade Set up report (+80 pips).

Good luck
Ian Copsey

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

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