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HARMONIC ELLIOTT WAVE

Friday, July 16, 2010

Dollar losses continue but we should be approaching a temporary low soon

Well, GBPUSD and USDCHF decided to play catch-up with EURUSD with Dollar losses extending through my support levels. In retrospect, given the standard correction to 1.2522 EURUSD it will imply a deep correction once this leg higher is over. For it to then reach the 1.3200-50 are thereafter it must also see a deeper correction. This is the guideline of alternation between key corrective waves.

So, with momentum still Dollar bearish we can expect limited corrections again and the prospect of further losses. I should warn that as we approach what I feel should be a major corrective Dollar low towards the end of this month the risk is for an increase in volatility and wider swings in price so more care should be taken from this point onwards.

Now, the interesting developments seen yesterday were the strong extensions in USDCHF and GBPUSD. Taking the former first the lack of any significant correction since the 1.1730 high continues to point to the fact this is more likely to be a corrective move. The comment I made above about alternation relates to trending moves. Therefore it appears that this decline we are seeing now is the penultimate decline. It should cause a correction before too long – just as I envisage in EURUSD – but then the two can plan their finale to reach their overall targets over the next 2 weeks in time for the Dollar reversal.

GBPUSD has continued its rally and is not that far below the 1.5523 swing high. I feel this will likely be tested and possibly marginally break (by 20-30 pips maybe) on this move higher. The very breach of this high will imply the downward move is complete from 1.7041. Just as its European buddies are still due to make gains against the Dollar so should the British Pound. That will imply that in the subsequent reversal higher in the Dollar that should see EURUSD move to new lows, both USDCHF and GBPUSD should not breach their respective extremes seen in June.

USDJPY – maintaining the decline well. It still has a move down to around 86.00-30 approx but then due a pullback. The outcome for EURJPY is therefore clouded and will depend on what moves first – the EURUSD rally that could extend the upside in the cross into the 113.58-81 area (max 114.06) or whether USDJPY beats it lower with its own losses… Take more care as we should be approaching a reversal soon…

Today’s free analysis is for GBPUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+55 pips)

Have a great weekend
Ian Copsey

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


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