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HARMONIC ELLIOTT WAVE

Monday, October 24, 2011

Dollar weakness expected with shallow corrections


Friday saw new Dollar lows against the Yen, Pound and Swiss Franc – even marginally against the Aussie – but try as it might could not surpass the EURUSD 1.3914-36 highs… Looking at the daily charts there’s no real confirmation of a break of Dollar strength but neither are there any strong indications that we’ve seen the Dollar’s lows in this move. Indeed, Friday’s extensions do seem to indicate that the recent bearish momentum remains intact with the short-term charts displaying the potential early foundations of acceleration lower. Overall there’s more suggestion that not only will any immediate corrections should be limited but also a potential acceleration in the Dollar’s weakness.

Perhaps rather surprisingly this seemed to be portrayed best by the rush lower in USDJPY. This break is in line with the 16.5 year cycle low which is due over the next 2-3 months. I was particularly struck by USDJPY finally joining the general Dollar decline as it now correlates through all the majors and AUDUSD in the expectation of a final blow-off before a multi-year reversal. Not only that, but there also seems to be a correlated and fairly imminent acceleration in the Dollar’s decline.

So, the short term appears to provide the most uncertainty in terms of any bullish correction, a possible recycling of corrections. It looks very much as if we need to be prepared to identify bearish set ups…

Have a profitable week
Ian Copsey

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