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HARMONIC ELLIOTT WAVE

Wednesday, December 8, 2010

Dollar gains look more likely today

The caution I voiced yesterday concerning Dollar strength proved correct as it spent most of the day on the back foot but losses were restricted which in turn provoked a reversal back higher by the end of the day. While I can’t totally rule it out I don’t think it’s quite time to call for a massive extension of gains but the upside does seem more vulnerable at this point with hourly momentum having reached current levels with some panache. A pullback does seem due but later extension does seem probable.

We’ll have to see how this goes but as far as I can see the sort of areas these structures appear to target do not really point to major now highs at this point. I am therefore more inclined to a more whippy and corrective style of development. Given there is only a week or 10 days of decent liquidity the prospect of grinding out the year in a choppy manner does seem to be more probable.

In particular the strength in USDJPY was much more evident than I had been looking for and the push higher does appear to have ruled out the more direct bearish risk. This pushes me more to the probable consolidation to be an upward movement rather than sideways. Therefore we should always be looking out for an eventual end to any Dollar losses.

This strength in USDJPY has taken EURJPY back higher and seems to have taken the fuel out of the downside. I’ll therefore take the foot off the bearish accelerator but can’t actually say that we’ve seen sufficient strength to rule out the bearish structure totally. In particular this cross has the potential to generate some rather horrendous consolidation patterns so best be cautious until some other catalyst develops.

Therefore, today does seem to imply a pullback lower in the Dollar and who knows, this could last for much of the day if the market has lost interest but I do feel the current basic risk is for a correction higher in the Dollar.

Today’s free analysis is for AUDUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+40 pips)

Good luck
Ian Copsey

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

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