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HARMONIC ELLIOTT WAVE

Tuesday, March 20, 2012

Time for a pullback?


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I can’t say yesterday’s developments went exactly to plan but they weren’t too far off with a few wrinkles that complicated one or two currency pairs. In particular the downside projections in the Europeans were far stronger than expected for the final part of the intermediate structure. It did force me to take a double check but looking across the three of them the impression I had was one of the need for a correction. Nevertheless, while I do feel the stronger argument is for a correction don’t under-estimate the downside risk which is predominant.

Overall, the Dollar extended losses and sets down the marker for the coming two or possibly three weeks so the upside should now be limited. The question is just how deep the corrections should be. In the Euro and Swissie I much prefer a shallow to medium pullback. However, it does seem to me that GBPUSD needs a deeper one. If this can develop then it may well imply a complex, but shallow, correction in the Euro and Swissie while GBPUSD generally maintains a choppy decline. Thus, we’ll have to look carefully during the process and react accordingly.

One pair that didn’t quite work to plan was USDJPY. I still prefer a deeper pullback lower but it seems as if the middle section recycled and as long as we don’t see any break higher the downside is still preferred. This still seems to be part of a penultimate pullback before a rally to a peak that should generate a much deeper correction. This tends to work with EURJPY that pushed higher and quite close to one expansion target and while there is a little ambiguity, from this point I feel we should be aware of the risk of a deeper reversal lower.

Early in the day it’s probably best to make sure we’re seeing the correction in the Europeans developing to confirm. Only be aware of stronger follow-through lower if yesterday’s lows are taken out.

Good trading
Ian Copsey 

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