Tuesday July 27, 2004 - 00:51:09 GMT
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FX-Strategy - www.fx-strategy.com
Forex: Daily Forecast for the U.S. Dollar vs Japanese Yen 27th July 2004Price 110.05
Resistance: 110.30 ... 110.65 ... 110.90 ... 111.25
Support....: 109.80 ... 109.55 ... 109.25 ... 108.90
Bullish to 111.25-45 before a pullback
The structure certainly looks to have taken the form of a triangle and we feel that this may well have completed this morning at 108.81. A break of 110.10-25 will confirm this and should allow price to rally up to 110.60-65 initially and after a small pullback all the way to 111.25-45 where we see a further corrective pullback. However, do take care at 110.65 with this also implied in an alternative structure which, if it holds, could take price back down to 109.25 again.
We prefer a bullish move today. However, watch resistance at 110.65 - if this holds and a break is seen back below 110.10-15 then we feel the risk then lies with a return to the 109.25 area. However, we feel that a good selling level will be around 111.25-45 which should cap and generate losses back to the 110.00-20 area.
Elliott Wave Comments
The erratic nature of the Dollar's rally here has made the wave count slightly difficult to identify. As the chart below shows we are beginning to favor the rally to 110.02 as a Wave (i) followed by a Wave (ii) to 108.08. From this Wave (ii) low we had been looking for a Wave (a) to end around 110.60-95 and for this to be followed by a Wave (b) and then a rally in Wave (c) to the 112.25 area which is implied by multiplying Wave (i) by 1.382. This may still be the case, but the failure on Friday to see the Wave v develop rather confused and while it still just may happen we feel there may be a risk of a stronger base-building underway. Indeed, there is a tendency in currencies for rather complex range-bound price development as we have seen to be a precursor for a much stronger rally that bursts higher and takes everyone by surprise. The three-wave rally to 110.30 could therefore be counted as Wave [i] of Wave (a) which clearly has very strong bullish implications. A break of 110.90 therefore could well generate a stronger rally to 112.30 in Wave [iii] to be followed by a pullback in Wave [iv] then a final Wave [v] move to complete Wave (a) of Wave (iii).
Clearly this is all premature and we are still mixed on the validity of the strongly bullish scenario but is worth keeping in the back of minds in case we see an unusually strong rally this week.
(c) FX-Strategy Inc 2004
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