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HARMONIC ELLIOTT WAVE

Monday, August 23, 2010

The threat of Dollar gains has increased considerably…

Friday partly went my way but mostly against although the alternate downside targets in EURUSD and GBPUSD held quite well. The rally in USDJPY was encouraging and the pullback to just below the 1.0402 corrective target in USDCHF was also as expected. However, it is the loss of 108.50 EURJPY that opens a can of juicy worms that raises the risk of a robust decline. Indeed, once this continues I feel it’s going to be really quite a shocker.

These may sound simple statements but there does remain a significant conflict. A bearish EURJPY implies that EURUSD will most probably be the driving force (as opposed to USDJPY.) However, the bearish structure in USDCHF has been almost point perfect and does imply losses itself. Of course it’s not impossible for both to decline if there is some catalyst. We have seen it before but it’s not something I like to rely upon.

Therefore, something has to break somewhere or there has to be some complicated correction to Friday’s Dollar gains to allow USDCHF to make its final descent to what should be a much larger reversal higher. The added complication is that it has already done the minimum to satisfy a weekly triangle target but I can’t see that the current decline has been completed.

Thus, today we have an element of uncertainty which needs to be clarified. If USDCHF breaks cleanly above Friday’s high and the 1.0405 area then just follow the Dollar gains across the board… Until then be open to come complicated consolidation that should see EURUSD and GBPUSD recover in some manner. Also keep in mind EURJPY – any break below Friday’s low looks like opening a pretty deep hole…

Just to cover USDJPY, it looks to me as if it has staved off any further losses with the 84.72-88 lows unlikely to be broken for now. However, I’m not convinced it’s going to mean any immediate strong gains as there is an odd-on chance that it will continue to consolidate in a sideways range, perhaps a reflection of the expected losses in the cross.

AUDUSD gapped lower on open this morning but the recovery has been deep enough to generate risk of a sideways consolidation before it, too, extends the downside. This may also be a possible indication of the Dollar going through a general consolidation to allow USDCHF to decline.

USDCAD has returned to normality – but “normality” here actually implies confusion…

Today’s free analysis is for EURJPY and can be found on http://www.fx-forecaster.com/DailyForecast.html along with Friday’s Trader Package Review & Trade Set up report. (+90 pips)

Have a profitable week.
Ian Copsey

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

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