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HARMONIC ELLIOTT WAVE

Wednesday, January 26, 2011

Well, has the Dollar bottomed out? (Part II)

It was an interesting day in many ways yesterday… GBPUSD nosed dived and USDCHF decided to follow-suit and extend its losses. Both of course suited me as I had been in favor of both these moves. However, USDJPY edged lower and EURUSD moved into that 1.3700-05 target I have mentioned several times over the past week...

So the Dollar declined… But no! The Dollar Index has not broken Friday’s low… Technically maybe I am still right…

However, we are close to make or break for the Dollar in general. The interesting thing about the decline in GBPUSD is that it stalled 20 pips above the support I declared must hold to retain the mega-bullish structure I had been looking at. Surely not… It can’t rally so strongly can it? Well, technically that structure is intact so I can’t totally rule it out but I still prefer a bullish Dollar – from the Index point of view.

There are several things that need to happen to confirm this. First and foremost USDJPY and USDCHF must find a final low very quickly. The latter has fallen into my retracement target area and the bullish divergences are supportive. The current rally in GBPUSD must remain limited to below 1.5850-70. EURUSD must sort itself out by the end of the day. I am seeing potential for an overshoot above 1.3700-05 but I have fairly strict limits for such a move.

In case the unimaginable happens… which I can’t imagine it will… If we see too much Dollar weakness it will imply that the monthly/weekly triangle in the Dollar Index actually completed at 81.44. The implication is quite significant and strong Dollar losses…

Just as a matter of possible interest, in line with the occasional comments I make on the DJIA, this is now getting very close to a level that should trigger a major correction. The 12,350-600 area (probably towards the lower end of the range) should provide a peak and a subsequent price drop of around 20%. We’ll have to see what’s in store…

Today’s free analysis is for USDCHF and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+150 pips)

Good luck
Ian Copsey

HARMONIC ELLIOTT WAVE - THE BEAUTY OF A FULLY FRACTAL STRUCTURE

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