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HARMONIC ELLIOTT WAVE

Thursday, May 20, 2010

At the very least we should see a more sustainable correction

All those extended targets were left waving in the air as the Dollar staged a much earlier reversal. What can we make of this? Well, the 1.2143 low in EURUSD was only 10 pips below a target I have mentioned from time to time at 1.2150. I admit the approach and the momentum position at that time did seem to point to a new low, the same for GBPUSD. However, it does seem to imply that we shall see a more substantial retracement at the very least. The thought that it could even be a much deeper daily retracement cannot be ignored but this will need quite a move yet to suggest that is possible. Therefore, I’ll take this step by step.

There is a little intrigue to be investigated in terms of the apparent decoupling of EURUSD versus USDCHF and the sight of them both rallying is quite mystifying. Certainly USDCHF met its minimum target at 1.1585 though I still have this higher area at 1.1666 which does attract. However, it is uncertain how long this decoupling can last and may suggest that the initial rally in the Euro may well be over and as we see a pullback USDCHF can extend higher towards target.

A further interesting event was the high in the Dollar index which reached 87.45 which is very close to a triangle target. That has a daily bearish divergence also so a pullback seems quite realistic here also – and maybe a turn down for the next leg of the triangle…

The reactions so far have been constructive but I’d still like to take the next step cautiously. Market sentiment against the Euro is not going to disappear overnight and on one day’s move. More work does need to be done. On the other side, while EURJPY fell short of target it does seem to be due for a correction higher but only within the realms of this being a correction. New lows are implied and that’s going to need either EURUSD to push to new lows – or USDJPY… The latter bounced nicely from support to retain a sideways consolidation and while this still needs a day or two more to complete the break of the 90.92-93.18 range does appear crucial. I’d prefer higher but then either EURUSD has to drop or the correction in EURJPY has to recycle higher. All this is a little beyond a daily horizon but useful to slot into memory banks to identify key breaks…

The Aussie… wow… and doesn’t look over but does seem to need a correction. USDCAD actually looks as if it can push higher again…

Today’s free analysis is for USDCAD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+0 pips)

Good luck
Ian Copsey

FX-forecaster Trader Package now available at €20.00 pm
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