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HARMONIC ELLIOTT WAVE

Wednesday, October 20, 2010

Yesterday sorted out the dithering…

I think yesterday price made a definite decision and has thankfully ended the admitted dithering I had over whether the Dollar would resume its downtrend or would correct deeper. Clearly it has chosen to correct. While I could see evidence of follow-through I was never 100% comfortable with the call and mainly because the DJIA and gold had reached targets which also suggested a pullback. Does Forex lead these two other markets or vice versa. As far as I can see it’s Forex that currently holds the controlling power but the argument for a pullback in the other two was quite convincing.

So, all cleared up now thankfully and we can now plan the remainder of the pullback. If you recall I had originally been given information about a potential cycle low around the end of this week or possibly into early next week. From what I can see of the move so far I feel that’s quite possible. What does concern me is that this is a correction to the rally from 1.2586 which has taken almost 2 months. One week of correction does seem very short… I think therefore we need watch how this correction develops as it does seem to hold risk of generating a sideways consolidation. This is also valid for the DJIA and maybe gold – but I’ll keep the doors open on the latter.

The general Dollar strength should spill over onto the other currency pairs – USDJPY seems to have now confirmed a modest correction, AUDUSD looks bearish also while USDCAD has shot back into what had looked to be a daily triangle and threatens a completely different structure. For today it should correct but I suspect further gains later…

The other currency pair which I feel of more importance – or interest at least – is EURJPY. I am coming to the conclusion that it still has one more medium term decline to come. It shouldn’t be a straight line as we’re due what I feel will be a deep correction. Once that is complete the decline can be a lot more robust. This tends to work more with a consolidating EURUSD as I intimated above and a more sharply declining USDJPY a further down the road…

Thus for today concentrate on identifying Dollar buying levels in general and which should continue through to the end of the week at least…

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. (+20 pips)

Good luck
Ian Copsey

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

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