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HARMONIC ELLIOTT WAVE

Thursday, July 1, 2010

EURUSD looks as if it as taken a more complex route lower…

That rally in EURUSD is too deep for a correction within the downtrend… What appears to have happened, just when it looked like the bearish track appeared to be on track is flip the balance and looks like it is developing in a more complex manner. My favored route is back higher to retest 1.2396 and maybe a few pips more in a recycling of the correction. Then the way will be free for the decline I thought we had already been seeing…

However, it’s a tight call and I’d begin to get wary if the 1.2196-10 area is broken. The difference between the two does make a big difference to the subsequent outcome once the final low has been seen. If this decline moves lower directly then it will trigger direct gains back above 1.2396 and to move to the final target. If we see 1.2396 first and then down there is an added chance that we could see a longer consolidation. We should soon see by which way price breaks in early trading which of the alternatives will develop – but I prefer the recycling back to 1.2396…

This should allow USDCHF to move further lower to its target, an event that should cause a much larger correction compared to any seen over the past 5-10 days. Equally, I am rather ambivalent to GBP. I do think it has minimal downside now – maybe none at all for today – and therefore we should be looking for gains along with EURUSD. The bigger question is whether it will see new highs or remain in a consolidation. Again, given I can’t see particularly good wave relationships as things stand now, I feel the risk may well be to new highs. However, that high would provoke a deeper and more sustainable period of consolidation.

USDJPY… Managed to get nowhere very quickly… I still feel bearish and mainly because we have not seen a deep enough correction to suggest the downside is complete. That should mean we see that correction now or from a minor new low. Between the two I’d prefer the latter, again as I feel the wave relationships would work better with a new low. This of course has implications for EURJPY. The low at 107.31 was a valid support that would imply a reversal back to the 113.40 high. However, there are lower levels that would also be valid. We therefore need to watch what USDJPY does first and whether this dovetails with EURUSD. The cross is one where we so need to take more care as it has a foundation for either eventuality. Take care.

Today’s free analysis is for USDCHF and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+125 pips)

Good luck
Ian Copsey

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

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