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HARMONIC ELLIOTT WAVE

Tuesday, October 12, 2010

The Dollar low is still a debatable subject but there is some evidence that it may be in place…

In the end Friday turned out to be much of a damp squid with the usual display of frantic confusion following the NFP numbers but then settled down into a display of virtual nothingness that extended through yesterday. No key swing Dollar swing highs have been penetrated so by definition the downtrend may still be in place. On the flip side I can’t really see much evidence of any constructive Dollar weakness.

So we are left a little in limbo having to wait for confirmation one way or the other. In the larger picture I am still eying the end of next week and possibly into the final week of the month as an approximate timing for a corrective low and given the distance that needs to be covered I would actually like to see the correction develop directly.

This is going to require Friday’s low in EURUSD to break and the 0.9700 high in USDCHF. However, take care as although they register a confirmation of reversal I’m not convinced we’ll see direct follow-through without some correction. Remember, this being a correction, the normal structural development is characterized by erratic and choppy trading.

On USDJPY the 81.69 lower support was reached within 2 pips. Momentum conditions do support a reversal but here the key swing high is at 82.55. Once this breaks we have the same potential for a larger recovery but this may not seem quite so erratic.

How the combination of a decline in EURUSD and a rally in USDJPY is going to develop is less clear. This cross has dipped rather deeper than expected and brings me to a more neutral outlook. I still feel in the much larger picture that a deep rally is possible. The problem I face is whether the rally we have seen is part of a daily complex correction that could force a test of 100 or whether we’ll see further gains once the current consolidation is complete. Until that is made clearer I think we need approach this with greater care.

AUDUSD is in the same boat as the Europeans and requires some confirmation of the next move – but clearly we have a deep daily bearish divergence so the downside risk is highlighted. USDCAD… I’m mixed here too. I tend to favor lower but just want to have price demonstrate a stronger intent.

Today’s free analysis is for GBPUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with Friday’s Trader Package Review & Trade Set up report. (+30 pips)

Have a profitable week.
Ian Copsey

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

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