Thursday July 15, 2004 - 01:00:20 GMT
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Forex: Daily Foreecast for the Euro vs US Dollar 15th July 2004Price 1.2386
Support....: 1.2420 ... 1.2445 ... 1.2470 ... 1.2490
Resistance: 1.2355 ... 1.2335 ... 1.2320 ... 1.2300
Mixed - waiting for breaks
The depth of yesterday's rally has caused some concern and while it has not confirmed any reversal we need to be cautious about the next move. While 1.2335-45 holds any break above yesterday's high at 1.2420 and then 1.2435 would provoke follow-through higher to 1.2445-1.2470. After a pullback we would then look for a final rally to the 1.2490-1.2535 target area where we look for a major peak to develop.
We are slightly disappointed with the strength of yesterday's rally and while technically it has not confirmed a reversal higher we need to be cautious about an overly strong bearish stance. Thus, only while the 1.2420-35 area holds a break back below 1.2335-45 would signal resumption of the preferred downtrend. Once below 1.2335 look for losses to break below 1.2300 to 1.2265 where a temporary pullback is possible but we look for a move down to the 1.2200 pivot support at least. Further support is found in the 1.2145-85 congestion area.
Elliott Wave Comments
We are exceptionally frustrated to have missed the recent rally and have adjusted the daily cycles as shown above. The cycles look bullish for a further 5-10 days and we are approaching the key resistance areas of 1.2355-1.2455 which we feel will be tested during this period.
From the daily chart it can be seen that we have adjusted the decline from 1.2927 to a diagonal triangle Wave (A) within which the Wave [v] was very close to being a perfect 76.4% projection of the decline from 1.2927 to 1.2055. This now implies we should be looking for a three wave correction higher and Elliott Guidelines suggest this should be to the span of Wave [iv] (at 1.2456) with a focus on the extreme of Wave [ii] of Wave [V], this being at 1.2387.
In the rally from 1.1758 we have now labeled the 1.2180 high as Wave [a] and the decline to 1.1771 as Wave [b]. We therefore look for a five wave rally to complete Wave [c]. We can look at several measurements for Wave [c]. Clearly there are the Elliott Guideline targets at 1.2385-1.2456 which we should observe closely. We should also consider the Double Bottom at 1.1758-1.1771 which would project a minimum target at 1.2600. Also consider a 76.4% correction of the entire decline from 1.2927 to 1.1758 which rests at 1.2650
Internally in Wave [c] we have seen Wave i rally to 1.2059 and Wave ii down to 1.1893. We can derive two targets for Wave iii. The first is around 1.2290 (which we have seen on Friday) being a projection of 138.2% and the second is at 1.2360 being a projection of 161.8%. Generally the former projection of 138.2% is more common. Therefore, following a correction in Wave iv we will expect the final rally to reach either between 1.2385-1.2456 or all the way to the 1.2600-50 area. We shall need to assess this as price develops over the coming week.
As suggested in the update above on the 30th May we are now appoaching the minimum target at 1.2456. Indeed, given the strategic nature of this level it is quite capable of holding this rally. However, the wave count shown below does project a target of 1.2540 both in the Wave [v] position and the Wave [c] of Wave [v] position together with a projection of Wave (a) and we therefore feel there is a chance of this higher level being attained. However, this would complete Wave (c) of a double zig-zag from 1.1758 and in line with the daily & weekly cycles we shall be looking for signs of reversal. Once the Wave [iv] low at 1.2265 is broken the next logical target will be the Wave (b) at 1.1975.
The loss of 1.2340 is encouraging for the downside and while we feel a break of 1.2265 will imply losses down to 1.1975 at least, we feel there is a risk of a pullback from the 1.2200-20 area before the next leg lower can develop. The way the shorter term wave count is developing we feel that any direct decline to 1.2260-65 would complete Wave (iii) and after a pullback to 1.2300-20 in Wave (iv) the risk will be lower to the pivot support at 1.2200-20 in Wave (v).
The pullback yesterday places a great deal of doubt on the directly bearish view. Indeed, having developed in three waves we are at risk of this being Wave b of Wave [v] higher and as such the next move should be up to the original targets between 1.2490-1.2540. If seen this should provide an excellent selling opportunity.
The above possiblity requires a break of the 1.2420-35 area and until that happens there is a chance that we have just seen an unusually deep pullback. If this is the case, then a break of 1.2335 and then the prior Wave [iv] at 1.2265 would keep the downside intact. Then we can expect a test of the weekly tend support currently around the 1.2040-65 lows.
(c) FX-Strategy Inc 2004
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