The Tail Has Swung…

Well, that’s been decided then hasn’t it? The week had begun with the hangover of the deep correction higher in the dollar that probed deep correction levels where traditional Elliotticians would dispute the Harmonic structure. Indeed, it did cause me significant discomfort, mainly down to the manner and depth of the losses in GBP/USD.

The latter is not quite yet a done deal on the upside yet – hourly and 4-hour momentum are strong and price just probing the daily Price Equilibrium Cloud high. We need just a bit more to feel more confident of the upside resuming. For EUR/USD and USD/CHF, due to the extreme direct nature of Thursday’s move there is just a short-term uncertainty of how deep the correction will be and/or whether we’ll get minor follow-through before the correction.

So, within the boundaries of the potential follow-through in the Europeans then correction and the potential for a modestly firm direct correction, the medium-term dollar bearish outlook I have been pointing to appears to be back on course. It also brings the casual dollar-equity correlation to be back in place. Even the aussie, following its rather chaotic development in the rising consolidation has confirmed its intent also – and probably now to slightly higher projections that I had been targeting…

Sitting in Tokyo, seeing the yen resume its rampant losses against the dollar and extra-super rampant losses against the euro have resumed. EUR/JPY in particular has been a maniacal rally and very clearly a massive underlying shift in the market’s perception of the yen’s value. This began in November 2011 where it recovered at the combination of both a 16.5 and 33 year cycle low, then followed by the 48-week cycle low in September last year.

The next 48-week cycle low is due in August. Thus, while there is still room for further gains, these should now be limited (relatively) with the next 1-2 months likely to see a major high and more substantial correction lasting into August. By early next year I think we’ll be heading to 101 and higher…

Right now it’s still EUR/JPY that’s leading. I have had to shift my overall counts to take into account the rampant gains. This still has a way to go but we should be looking out for a correction soon. It needn’t be too deep, the next deep correction perhaps not developing until USD/JPY begins a more volatile period – a deep correction followed by the move to the final high ahead of the decline into August.