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HARMONIC ELLIOTT WAVE

Friday, December 3, 2010

The Dollar pullback should soon be complete…

Yesterday was a mixed bag… and a pretty messy one as well but one that did basically see Dollar losses by the end of the day. It has brought us close to the retracement areas against EURUSD and GBPUSD that I mentioned yesterday. Beyond that USDCHF and USDJPY both dropped rather strongly and against expectations. These two in particular have caused a certain degree of doubt over whether they can resume the current Dollar bullish structure. However, I can’t say it has broken as yet, but quite what they represent is more unclear and do beckon a more cautious approach.

In particular there has been an ambiguous interpretation of this pullback in USDJPY. Either way the implication is for eventual losses to a new historic low. The question has been more whether the current correction is complete. Given EURJPY has also approached a full correction the prospect of both USDJPY and EURUSD falling is not out of the question, but probably preferred, even if it is only for part of the entire decline. In particular a break of yesterday’s USDJPY low would be a strong pointer and below 82.77 would confirm…

The dip in USDCHF was totally unexpected also. In many ways I have remained bearish USDCHF overall and have considered this rally as corrective. Its recent sporadic pattern of correlation with EURUSD has made it more difficult to ascertain quite what it will do and when. Ideally it should still extend its gains since if EURUSD makes the expected final decline it would appear logical that USDCHF can rally to the higher target I have been looking for… I think the next couple of days could well highlight the strength of this expectation.

So as we go into the end of the week I do see the corrective targets in EURUSD, GBPUSD, AUDUSD and EURJPY all close to current price. Therefore watch these for signs of a resumption of Dollar gains… or for break which would then turn the Dollar on its head and imply a larger reversal.

Hopefully USDCHF and USDJPY will extend gains one more time but take care with these given the slight deviance from the expected rallies in both.

Today’s free analysis is for GBPUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+25 pips)

Have a great weekend
Ian Copsey

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

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