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HARMONIC ELLIOTT WAVE

Tuesday, August 17, 2010

The Dollar bearish correction should extend today

I saw two potential stalling areas yesterday and the first area seems to have triggered the reversal. Overall this does seem set to extend further today with the first half of the day likely to see a mild pullback and consolidation. However, there are a few issues to watch out for that could cause problems so it will be best to be aware of these.

Basically, both EURUSD and GBPUSD stalled at the first downside hurdle and generated a corrective move higher. In some ways these were complete corrective patterns in their own right that could allow the Dollar rally to resume. However, I have strong doubts over that possibility. One of the things that drives my opinion is the drop in USDCHF. It hasn’t breach the 1.0331 low yet but momentum remains bearish and as mentioned yesterday I have a feeling this may well extend to the target area I had been considering for the past few weeks.

This event should also lead to the upward corrections in EURUSD and GBPUSD. I do not think these will get particularly close to their highs – just closer than we are at present – and with luck we may find USDCHF finding its downside target at the same time as the other two find their corrective highs.

Next, USDJPY dropped quite sharply and is threatening to retest the 84.72 low. Again, it’s not my favored view to see new lows – at least below 84.65 which may have a minor chance of occurring though again I have serious doubts. However, there is a complication here in the EURJPY cross. I am bearish for the latter overall and saw the 109.15 low as a possible internal extension. However, a drop at this point will clearly require either (or both) EURUSD or USDJPY to continue their decline. Given that decline in the cross was just a bit choppy we may have to allow for minor new lows but a recycling back to the 110.10 high is then possible. If anything, this is my favored view as it will allow EURUSD to remain bullish and USDJPY to remain in a range – but above 84.72.

The Aussie looks less bullish but should see a marginal new high. From there I suspect it will lapse into a sideways trading range. USDCAD… just getting a bit suspicious here and feel that the upside is limited so 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. (+40 pips)

Good luck.
Ian Copsey

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

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