Friday July 16, 2004 - 01:29:55 GMT
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FX-Strategy - www.fx-strategy.com
Forex: Daily Forecast for the U.S. Dollar vs Swiss Franc 16th July 2004Price 1.2375
Resistance: 1.2410 ... 1.2425 ... 1.2445 ... 1.2465
Support....: 1.2360 ... 1.2320 ... 1.2300 ... 1.2280
Cautiously higher to 1.2445 before correcting lower again
We are rather disappointed with the lack of follow-through on the break of 1.2390 and note the bearish divergence that is developing in FXS-RSI. We still feel however, that while 1.2340-60 holds that there is still room for further minor gains that should reach 1.2445. However, only above this level would confirm follow-through that should be quite firm and move higher to reach 1.2510 at least and we suspect 1.2555 where a pullback is likely.
The lack of follow-through above 1.2390 raises an alternative view that is still bullish in the long term but would imply a prior corrective decline. We feel that there is a liklihood of a test of the 1.2445 area later today but while this holds and a drop is seen below 1.2370-90 further losses are probable. This would imply losses down to 1.2300-20 at least and we suspect to 1.2260-80.
Elliott Wave Comments
We have attempted to make more sense out of the complex cycles in the Swissie and consider there is a strong risk of a final low occurring this week. From the daily chart above is can be seen that we have altered our Elliott count for the rally from 1.2140 to 1.3226 into a rising diagonal triangle Wave(A) and thus we are witnessing a correction in Wave (B) that should develop in a three wave decline or a series of three waves. We therefore prefer the count shown below that has the decline developing in a Double Zig-Zag.
Within this we need to concentrate on the second Zig-Zag labeled as (a)-(b)-(c) and we can produce two potential target areas for this move, these being at 1.2370 representing a 138.2% projection of Wave (a) and the second being at 1.2280 representing a 161.8% projection of Wave (a). Neither has preference. If we look at Fibonacci retracements of the move from 1.2140 to 1.3226 we see a 76.4% retracement at 1.2395 and an 85.4% retracement at 1.2300. Thus we need to observe price action closely during this week and expect a deep recovery at some point.
We are now close to retesting the crucial 1.2140-1.2185 lows and the structure does allow for the possibility of this test. On an Elliott Wave basis only we cannot rule out the possibility of a breach to the next support targets at 1.2075 and even 1.2010. However, considering the bullish weekly cycles it is not our preference. We see targets for Wave v of Wave -c- at 1.2135-40 and also a target for Wave -c- itself at 1.2145. Thus we tend to focus on this level as an end to the downtrend. First retracement whould quickly reach Wave -b- which is found at 1.2675.
The move through to new highs has been quite subdued and we need to consider an alterative wave count that would lebel the initial rally from 1.2203 to 1.2388 at wave a, the decline to 1.2254 as Wave b and any failed test of wave equality in Wave c at 1.2445 would then imply this as a Wave [i] peak. This being the case we would look for a pullback in Wave [i] down to 1.2280-1.2320.Directly above 1.2445 would accelerate gains in Wave[iii] to 1.2555 en route 1.2675.
(c) FX-Strategy Inc 2004
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