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HARMONIC ELLIOTT WAVE

Monday, August 16, 2010

The Dollar’s strength looks like stalling later today

The last report before the break saw the Dollar weakness extend further than I had been expecting which caused a flurry of uncertainty only to see the reversal which I had been expecting then develop. The Dollar gains seen last week have been uneven across the currency pairs with the Euro being the strongest loser which, if the original expectations I had remain valid, doesn’t really surprise as it’s only the Euro that I would expect to make new lows against the Dollar.

Today should begin with a mild follow-through of Dollar gains but I’m not sure this will set the trend for the week. A correction is due, potentially quite deep and could last anywhere between 2-4 days depending on how it develops. However, I do see a little divergence in outlook here as the rally in USDCHF has not been particularly robust. It does resurrect the original target I had been contemplating so be aware of the potential for a new low in this pair. I’m a little mixed on this front when considering GBPUSD but my feeling is that we probably completed the rally at 1.5997…

Next, USDJPY stalled perfectly in the 84.65-82 support area I had been highlighting and this also contributes to the general expectation of a stronger Dollar. I don’t expect this to be broken – or if it does it would suggest a much earlier resumption of the multi-year Dollar bearish trend. However, the risk here is for the recent erratic and choppy price development that has been the pattern for the past (almost) two years is most likely to remain. However, this does appear to be the last leg – as I view the Dollar’s anticipated gains against the Europeans over the next 2-3 months – and therefore once complete should provoke a much stronger bearish Dollar thereafter.

Indeed, USDJPY gains could lag overall against the Europeans which should keep EURJPY on a general downward path. We should remain aware, though, that this should continue to be a choppy decline but a break of the 107.31 low does appear to be a probable outcome this week – or if it gets embroiled in a tight consolidation – then next week.

I am slightly mixed with AUDUSD and while there should be losses over the day I don’t foresee these being too deep with a correction higher likely. USDCAD has close resistance that needs to be watched which will provide the trigger for the next move but we’ll need to see what it does first.

Thus, on the day a general overview would be for the Dollar strength to remain in place for the first half of the day at least but I think a larger pullback should begin by the end of the day.

Today’s free analysis is for USDJPY and can be found on http://www.fx-forecaster.com/DailyForecast.html along with Trader Package Review & Trade Set up reports.

Have a profitable week.
Ian Copsey

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

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