Monday, October 17, 2011

Dollar poised on the edge…

The Dollar lost out on Friday… but will that continue today? Maybe… maybe not… Actually, a more definitive answer is “as long as it breaks below Friday’s low” in particular again the Euro and Pound. The Swissie still has a small amount of leeway. However, broadly those lows were within the boundaries that risk a recycling higher which will merely delay the decline rather than reverse … probably.

Ahhh, the word “probably.” Let me explain that. As I have been told by a couple of sources who observe cycles the upside failure in the Dollar implies a stronger decline. Their cycles are pretty good but with all techniques there are confusions and the key is to make sure that price behaves in accordance with the smaller cycles to confirm the larger. That’s the same as Harmonic Elliott Wave.

Well, just take into account just how far we have retraced the decline seen in these two pairs. The answer is “solid” but not yet enough to really say that we’ve confirmed a total reversal. Still, the shorter cycles do still seem to be behaving so the emphasis is still higher for these two. However, Friday saw EURUSD approach to within spitting distance of the 1.3936 corrective high and it would be far more comforting to break above this high.

Therefore, we should be aware of the risk of a recycling lower over today and maybe into tomorrow and as long as this is limited then the larger Dollar weakness should remain intact. It also goes without saying (but I will) that any break below Friday’s Dollar lows will imply direct resumption of the move lower.

EURJPY is also in the same boat although that has some fairly solid 4-hour & hourly bearish divergences. No key lows have been broken yet but watch for that risk. Again, above Friday’s highs would confirm the next leg higher.

Thus, there’s some short term uncertainty as we start the week but the parameters for breaks seem well defined.

Have a profitable week
Ian Copsey


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