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Daily Technical Strategy - Dollar still headed lower
WEEKLY SPECIAL - Friday 12 August
EURUSD: Basis for our medium-term analysis is a daily chart going back to the month of December. A new 5-wave descent was started from the 1.3650 peak, where the Jan-Feb move down to 1.2750 was wave1, retracement 1.2750 to 1.3500 is wave 2 and the March to July movement from 1.35 to 1.1860 is wave 3. Wave 3 effectively ended on the 1st of August when the Euro moved up through 1.2240.
We are now in the corrective wave 4, according to Elliott, the amplitude of wave 4 often equals that of wave 2, which was 750pips. Adding this to the 1.1860 low, we arrive at a target-rate of 1.2610 for the present up-move, calculating the 50% retracement of wave 3, we arrive at 820pips or 1.2680.
For the coming week, we expect EURUSD to continue rising, with trend-support at 1.2400 and strong support at the 1.2340 level, ultimately reaching our target levels in the 1.26-handle. Whether the current up-move will continue, backed by still rising energy and commodity prices is yet to be seen. If that is the case, our new projection is calculated using 138% of wave 2 (=1035pips) OR the 62% retracement level of wave 3 (=1016pips), pointing to 1.2875-95.
This said, the outlook further into September/October should see the end of the current move up, followed by a wave 5 which must at least equal the 900 pips of wave 1 and which must hit a lower low than the 1.1860 seen with wave 3. Our early estimates are for a prolonged downmove in EURUSD that may last through the months of nov-dec and into January of 2006.
GBPUSD: We do not have such a pronounced 5-wave descent in Cable and I dare not make such long-term predictions as in EURUSD above.
Again on a basis of a daily chart, we notice that the april – july movement down from 1.93 to 1.73 was clearly ended upon the rise through the 1.7750 level last week. 38% retracement was 1.8060, cleared yesterday, for next week we maintain a bullish outlook to at least 1.8300 (50%) or as high as 1.8540, the 62% retracement. Key support levels to maintain a bullish view next week will be the 1.8060 level that held well today and especially the rising trend-line at 1.7950
USDJPY: This pair has only turned from a bullish medium-tem outlook 2 days ago when rising trend-line at 110.70 was broken. Closing sub 110 tonight has a bearish tone for next week, we will expect the pair to continue loosing ground, with support at 108.25 on the way down. Target level for next week will be the 106.60 level, strong support back in June and medium-term rising support in place since the beginning of the year. To the upside, watch resistance at 110.70, suggest selling any spike that we may see above 110.25.
USDCHF: The 5-wave count certainly does work in this pair. As in the Euro, wave 3 has been confirmed completed when the underlying bullish trend-line was broken in the first August week. Using the 780pip amplitude of wave 2 (1.2260 to 1.1580) measured from the 1.3080 top, we arrive at a target rate of 1.2300. Note that Elliott wave theory clearly states that the top of wave 1 (1.2260) cannot be higher than the bottom of wave 4, so there is no extra room to push USDCHF lower than the expected target of 1.2300 at this stage, in fact, we may see a considerable slow-down of the current down-move as we approach that level, leaving EURCHF sensitive for a reaction to the upside, in case the EURUSD’s rise does not stop in the 1.26 handle.
Рискът е тънката граница между страха и благоприятната възможност.
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