Friday, January 14, 2011

That settles that…

Please note that since Monday is a bank holiday in the U.S. the next report will be on Tuesday

Well, I wasn’t overreacting… Actually, perhaps I under-reacted since I hadn’t anticipated such an aggressive follow-through. That was quite a move in EURUSD… Well, that last statement is quite important. While EURUSD flew through the air with the greatest of ease, dragging GBPUSD in its wake, both USDJPY and USDCHF saw mush more subdued reactions. Indeed, these latter two actually held important supports that could still generate follow-through higher. But will they?

As far as I can see EURUSD has reached a level where a pullback is due and quite a moderate pullback too. This will provide USDJPY and USDCHF to react is they wish. Do I think they will? It seems like USDJPY is in the mood for another push higher. An interesting observation, although the structural development in EURJPY is not as crisp and clean as I would like, suggests that while it is due a correction now it may not be too deep and could make new highs later. Therefore, if the deeper EURUSD correction is correct, also the shallower EURJPY then it is logical that the cross should rally… Therefore watch the key support in the cross to confirm such a possibility.

USDCHF is less clear. It still retains the 4-hour bearish divergence – which clearly wasn’t confirmed yesterday. The structure of the drop is a bit messy – I don’t like it too much. However, the depth of the pullback and the fact it has remained above 0.9604 does fit a corrective retracement within a more direct rally. Thus, be aware of the upside potential. I think GBPUSD will follow a similar pattern to EURUSD…

AUDUSD was stronger than expected again and frankly hasn’t indicated a reversal lower yet… or not a strong one. Perhaps working with breaks is better but given the Aussie’s propensity to just keep going in one direction the upside may well be the more vulnerable side… Cautiously I feel that USDCAD should recycle higher…

Today’s free analysis is for GBPUSD and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+0 pips)

Have a great weekend
Ian Copsey

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