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HARMONIC ELLIOTT WAVE

Wednesday, July 14, 2010

It seems I was too aggressive on the deep pullback – Dollar downtrend resumes…

That low at 1.2522 EURUSD was a valid retracement target. I had been expecting just a little more. However, the reaction higher to new highs has all but confirmed resumption of the uptrend. Perhaps the only risk is a total recycling of the correction back to 1.2500-22 but, while not totally impossible, would appear to make the entire correction from 1.2722 to be totally out of whack.

So, it certainly seems as if we’re on our way higher to the next target levels which should be the penultimate highs before the final push to the low 1.32’s. This seems quite straight forward. However, it has left the correction in USDCHF rather blinking in confusion as the Euro races ahead of the Swiss Franc for the first time since the Dollar highs. I won’t rule out a recycling here but it’s touch and go at this point. The bigger implication of this is that the structure of the decline in USDCHF has begun to look for corrective rather than impulsive.

In many ways I view this quite positively as it does tend to fit in the weekly picture quite well, this being a potential triangle which will require one final (daily) rally to complete the entire pattern. Given that following the anticipated high in EURUSD over the coming week or two I will be looking for a new low in EURUSD the two tend to confirm each other quite nicely. GBPUSD has me more cautious and I’m less inclined to look for new highs just now (or significant ones) for the consolidation to continue.

USDJPY caught me out with the new low and reversal. I still see this as a pullback and not a rally to new highs and should therefore remain below 89.14. In fact it has helped out EURJPY. It’s bounce from 110.67 yesterday was interesting in terms of the degree of retracement and does point to a retest of the 113.40 high. The sooner turn around in fortunes of EURUSD is going to help the cross out to reach that high and probably just above.

In turn it does mean that USDJPY needs to decline back down to 86.96 and then the 84.82 low. As I described the situation in USDCHF, the same applies to the situation in USDJPY. The anticipated decline to 84.82 also appears to be a penultimate leg in a weekly triangle so will need one last rally before the larger monthly trends all confirm the Dollar’s demise once again.

AUDUSD looks firm – and probably stronger than anticipated. USDCAD should reach its 1.0201 (approx) target.

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. (+15 pips)

Good luck
Ian Copsey

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

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