Wednesday, August 31, 2011

Time to lie down and die?

I wasn’t quite ready for the depth of the corrections in both EURUSD and GBPUSD. It has shifted the short term structure but not the long term and unless calamity occurs it is time for the Dollar to lie down and die. Of course, it will rise from the dead at later date … but not in 3 days… The coming week is therefore critical for my underlying Dollar bearish view and there are signs appearing from many areas that point to this outlook. However, what is needed to hammer down the final nail in the coffin is downward acceleration.

Gasp… wait for dramatic drum roll…

And indeed it is critical. I have long indicated my Dollar bearish preference into the tail end of the year based on 16.5 year cycles. The one caveat I have is that we are within the window for this cycle low and from a timing perspective the reversal higher could occur at any time. For whether we have seen the low I obviously work with Harmonic Elliott Wave and at this stage I can’t see that we have seen those lows. Apart from USDCHF neither have we seen the normal spike lower that is normally seen at such cycle lows. To see what they look like take a look at the monthly USDJPY chart for 1978 and 1995. Right now we are seeing the same cycle approach its low. The same can be said of USDCHF…

From what I can see of EURJPY it’s also ready to lay down and die and if this also occurs then it does imply a much more aggressive decline in USDJPY than rally in EURUSD. These are more clues to try and identify whether my outlook is correct or not. The cross should ideally now not move above the 111.94 high. There is a minor risk of a limited break but it does seem pretty distant.

There will be plenty of room in the Dollar’s demise so even if we miss the early stages to confirm the risk there should be plenty of opportunities along the way…

Good luck
Ian Copsey


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