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HARMONIC ELLIOTT WAVE

Monday, December 13, 2010

I still feel the main risk is consolidation

With now just 9 days of trading before Xmas, of which only this week will have any resemblance to normal trading conditions (and even that is only a distant resemblance) the hunger for risk remains minimal. The past week has reflected this sentiment through the whippy and difficult market conditions and frankly I can’t see this changing – or perhaps with the exception of USDJPY and by implication the JPY crosses.

While the stand-off between the Dollar and European currencies still looks to extend, USDJPY bounced perfectly from its support on Friday to set up a final push higher in the rally from 82.33. Once this is complete the tide should turn and retreat to lower levels and drag the crosses with it. However, I do feel this will be for a correction only in USDJPY, the question being just how deep this can go. EURJPY on the other hand I tentatively feel can move lower in a more sustain manner. Now, that either means USDJPY will reverse lower totally (likely only if it doesn’t make minor new upside targets over the coming day or two) or EURUSD is going to have to provide the fuel for the drop in the cross. Frankly this looks more likely. What is a little difficult to judge at this point is quite how long the current impasse will remain.

The European currencies have been mapping out a complicated and hard-to-follow corrective pattern. However, this does seem to be part of a mild bearish Dollar correction which should be followed by a resurgence in Dollar strength. This should always be kept in mind as the main risk with the immediate corrective price action due to come to a conclusion – but as I mentioned “when” is more difficult to judge.

For the moment I see the messy moves remaining so look for the key USDJPY and EURJPY resistance levels and also the break levels that would allow the downside to resume…

Today’s free analysis is for EURUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with Friday’s Trader Package Review & Trade Set up report. (+0 pips)

Have a profitable week
Ian Copsey

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

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