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HARMONIC ELLIOTT WAVE

Tuesday, October 5, 2010

The Dollar extension lower appears to be taking a more scenic route…

It seems I was too hasty in looking for the Dollar decline to follow-through. Yesterday’s developments at first caused me to doubt my targets but on review the downside failure is perhaps a more difficult structure to follow than the Dollar taking a more scenic route to the eventual targets.

So… what does that mean? I don’t think there’s a single answer to be honest and if I’m right in that view we could see a variety of individual performances in the Europeans. On a broad basis I’d look for EURUSD to make a marginal new low early I the day but then correct higher. This will probably still imply further low to come by the end of the day at the earliest and quite possibly into tomorrow.

While EURUSD makes its early declines I would like GBPUSD to remain sidelined but then get carried higher by EURUSD to a new peak in this move but remain below the 1.5921 high. Now, what USDCHF manages to do is a different matter… This has shown its ability to mark its own course anyway and I feel this one will require more observation rather than action today. The end result may well be neutral I feel.

Therefore, the sum of all these moves should be that we’re going to see some choppy sideways moves, marginal breaches and reversals. By tomorrow we should see a Dollar corrective peak that should then spurn a move to the low I had envisioned yesterday – so perhaps we’re talking a low by Thursday or Friday now.

USDJPY… the moves here have been so complex it has been hard to follow. Yesterday’s rally was particularly sharp but then the reversal equaling the upward velocity. It has already begun to rally this morning and I actually favor a higher high today but I’m not convinced this will follow-through much above 84.00… We’ll have to watch the reaction there.

The combination of moves in USDJPY and EURUSD is going to make EURJPY quite choppy and much will depend on timing and any correlation. I’m not totally comfortable with the way the cross is developing but with the prospect of an eventual rally & reversal in EURUSD (that is the rally to the end of the week) and the potential for the 84.00 area to cap the impact on EURJPY could well remain choppy.

AUDUSD… whew, mixed here. I still have a bullish bias but whether this turns out to be direct or not is unclear. USDCAD bounced from 3 points above the 1.0176 target… how it develops from here is crucial.

Today’s free analysis is for USDJPY and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+20 pips)

Good luck.
Ian Copsey



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