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HARMONIC ELLIOTT WAVE

Friday, March 25, 2011

Not what was expected… but still favor the Dollar upside for now…

Yesterday was a bit of a mixed bag in terms of direction but pretty much a horror for the forecasts. Early trading seemed to be banging the nail on the head as the Dollar began with gains but then all went haywire… EURUSD rallied much deeper than expected while GBPUSD declined more than expected and USDCHF stalled midway to target. None of them seemed to have read the script…

In particular the depth of the pullback in EURUSD is the one which has caused me most concern. The very best fit in terms of ratios suggests we saw a correction to 1.4052. That raises the alarm bells given the fact that I had been looking for a potential major high for a correction that should last for several weeks… The other fact that I still see potential for further losses in USDCHF is also nagging at the back of my head. Ok, these two have had an on and off relationship as far as correlation is concerned for some while but the target I have been eying is still 400 points lower…

So the number keypad suffered a great deal of beating this morning in an attempt to try and identify an alternative. I can’t say that I really found one. What does strike me overall is that GBPUSD seems close to a bounce – but one that should be only a correction before another leg lower. The other indicator for EURUSD is EURJPY which dipped mildly below my retracement target yesterday but not so significantly that it rules out the directly bullish argument. Now, that still needs confirmation and from the look of USDJPY it doesn’t look as if that will be the driver. It’s not impossible and after the whole of this week of seeing a 62 point range something has to give at some point… Which way appears to be more of a coin toss right now.

However, the cross, in conjunction with EURUSD and USDJPY could provide the trigger to clarify the situation in EURUSD. At this point I am still in favor of a stronger Dollar but with a caveat within a caveat within a caveat…

Today’s free analysis is for GBPUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html.

Have a great weekend.
Ian Copsey

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