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HARMONIC ELLIOTT WAVE

Monday, July 18, 2011

Does the market really know what it wants to do?

Friday turned out to be a bit of a damp squid. After a period of more directional moves the deeper corrections particularly in EURUSD and GBPUSD appear to have left the market rather confused state. As far as I can see the Euro is poised on a knife edge in terms of the next direction while GBPUSD seems to require one more push higher before a correction, possibly even a modestly deep one. If there is to be any correlation then I’d go for a lower Euro that should extend to new lows … but don’t expect the sharper losses that have been seen over the past two weeks.

Just looking ahead a little I do feel that the Dollar is going to switch back into negative mode and one that should maintain the overall bearishness I have been looking for, particularly in USDJPY, USDCHF and GBPUSD. The Euro should begin to recover quite well also but could remain vulnerable to another bout of quivering bellies at a later stage. So the Europeans in particular look as if they’ll start the week with an element of confusion but end the week on a soft note.

Now, USDJPY… can a 40 point range really be accepted as a full trading range? It does present a basic confusion and maybe even a complicated one… Take EURJPY as a marker. It reached the 112.93 resistance well but does seem to have lost its way. The question is whether this completed the correction or whether it’ll develop further in a more complex correction. However, it does tend to put the edge on the downside. That could mean both EURUSD and USDJPY move lower together. I have been looking for USDJPY to move down closer to the 76.31 low but it really does need to get its skates on. Once it gets there the next reaction should be a more sustainable correction.

In EURJPY the downside, when it comes, seems far more aggressive and probably requires a break to new historic lows in USDJPY. Therefore there may be a greater probability that the cross will see a rather messy and complicated correction.

Thus, I feel we need to approach the start of this week with some caution.

Have a profitable week
Ian Copsey

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