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HARMONIC ELLIOTT WAVE

Tuesday, December 14, 2010

This move down in the Dollar looks as if it should extend a little further…

December illiquid markets are a combination of deathly, dull and erratic ranges that when they break just make a huge adjustment within a flash. The latter is what we saw yesterday but didn’t reflect what I had thought to be the risk… In some ways I’m happy as I didn’t really like the Dollar upside from a structural perspective but still being a correction leaves us with a mixture of alternatives. I understand that Lunar cycles are still bullish on the Europeans through to next week at least, perhaps the end of the month at a stretch so this leaves us with the prospect of a similar pattern of consolidation and frenetic breaks…

As things are now my main impression is that we may not have seen the end of the Dollar losses quite yet. Clearly the collapse has brought with it more bearish momentum conditions which, at the very least, should prevent a significant reversal but could end up with an eventual one. My own preference is for a mild extension of yesterday’s Dollar losses but then a return to consolidation/correction.

Even USDJPY was hit by this. The reversal at the 84.29-39 area was expected but I had expected a correction and slightly deeper extension higher before the larger reversal which we saw yesterday. However, equally, I can’t see this bearish pullback deepening much more and, indeed, may well have completed the correction.

That leaves the cross looking form – and again something I had not really wanted to see. It is still on the bearish side overall but this rally cannot extend much further without breaking the larger bearish structure. It would be prudent to take a more neutral approach to this as it would seem, at this point, that the only thing that could allow the cross to resume is strong weakness in USDJPY. Well, it’s not impossible but I don’t think it’s a call I want to make at this point…

As always at this stage in December, take care. The whippy & erratic market behavior could easily resume…

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. (+75 pips)

Good luck
Ian Copsey

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

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