Despite falling to as low as 72.70 in H1 2011, dollar index found good support there and staged a rebound from there back to the opening level of 2011, suggesting the major downtrend is not ready to resume yet and wave IV correction is still unfolding as a complex correction. We are keeping our preferred count that a major (A)-(B)-(C) wave has commenced since 1980s with (A) wave ended at 78.19 in 1992, followed by a 3-legged wave (B) ended at 121.02 in 2001 and 5-waver wave (C) is unfolding with wave III ended at 70.70 in 2008

The British pound extended the circle wave V in 2011 in line with our expectations and met indicated downside targets at 1.4000, 1.3700 and 1.3190/00 (approx. 50% projection of 2.4967 to 1.5122 measuring from 1.8114), although the decline exceeded indicated projection target at 1.2030 (61.8% projection), the subsequent rebound from 1.1470 suggests the circle wave V has possibly ended there and consolidation with upside bias is seen for correction of recent downtrend to 1.4790-95

Although the single currency broke above previous resistance at 1.4349 and edged higher to 1.4380, lack of follow buying and the subsequent retreat suggest the wave 4 correction from 1.2451 has ended at 1.4380 (just faltered below 38.2% Fibonacci retracement of 1.7509-1.2451 at 1.4383) and bearishness remains for weakness to psychological level at 1.3000, then towards previous support at  1.2778

The greenback resumed the decline from 1.3066 top (2009) as we suggested in our previous update, indicated downside targets at 0.9745-50 (61.8% projection of 1.1725 to 0.9931 measuring from 1.0854) and 0.9500 had been met last year, however, the subsequent rebound from 0.9407 suggest the B wave from 1.3066 has possibly formed a low there, hence consolidation with mild upside bias is seen for a test of resistance at 1.0674

Although the single currency edged higher in early part of 2011, the subsequent retreat has retained our view that wave V has ended at 0.9805 back in 2008 and consolidation with downside bias is seen for test of previous support at 0.8067 but a sustained breach below this level is needed to encourage for a stronger retracement of recent upmove to psychological support at 0.8000 and later towards 0.7740-45

The single currency easily met our indicated wave (C) downside target at 1.2275-80 (50% projection of 1.5880-1.2765 measuring from 1.3835), 1.2025/30 (50% projection of 1.6377-1.2765 measuring from 1.3835) and 1.1910 (61.8% projection of 1.5880-1.2765 measuring from 1.3835), however, the subsequent reversal from 1.0075 suggests it is quite possible that the (C) wave has possibly ended there with an extended wave 5.

The Australian dollar extended recent upmove in line with our expectations and exceeded all our indicated projection targets at 1.0300, 1.0595/00 (50% projection of 0.8066 to 1.0183 measuring from 0.9536) and 1.0840/45 (61.8% projection), however, as aussie retreated from 1.1081, suggesting minor wave (III) has ended there and consolidation in wave (IV) would take place in 2012 and pullback to 1.0000 and 0.9700 would be seen

Although the single currency has continued to move lower in line with our expectations, due to the impulsive structure of the major rise from 88.93 (2000 low), we are keeping our view that wave IV is still unfolding with only A leg of IV ended at 169.97, so the decline from there is still treated as a 3-legged wave B and (C) leg is still in progress, our indicated downside targets at 105.44. 103.00, 101.77 (61.8% projection of 127.95 to 105.44 measuring from 115.68) and 99.88 had all been met last year.

Although the greenback extended recent downtrend in line with our expectations, our indicated downside targets at 0.9340/45 (100% projection of 1.2298 to 0.9910 measuring from 1.1730), 0.9185/90 (50% projection of 2.9343-1.1100 measuring from 1.8310), 0.9000 (psychological support) and 0.8666 (61.8% projection of 1.1730-0.9463 measuring from 1.0067) had all been met, as dollar then reversed the selloff on intervention by SNB and staged a strong rebound from record low of 0.7068, suggesting the wave V of the wave (C) has possibly ended there.

The indicated long term downtrend from 570.99 (29 Feb 1980) is still in progress in line with our expectations as an impulsive wave with circle wave III ended at 129.77 (20 Apr 1995), followed by circle wave IV ended at 251.12 (20 Jul 2007), the circle wave V decline from 251.12 is unfolding with minor wave 3 ended at 118.87 in 2009, followed by wave 4 at 163.00 and wave 5 already met our indicated downside targets at 120.00 and 118.87

The British pound continued to traded within early established range in line with our expectations, we are keeping our count that the rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as (A), the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree circle wave B. The selloff from there is a 5-waver with wave 3 ended 1.3500 and wave 4 has either ended at 1.7044 or is still unfolding

The greenback finally broke below previous support at 79.75 (circle wave III bottom) last year after the 9.0 earthquake in Japan, adding credence to our view that circle wave OV has ended at 124.14 and circle wave V is still in progress for weakness towards psychological support at 75.00, however, as this move is viewed as the final stage of the circle wave V (or at least the first leg of circle wave V), downside should be limited to 74.40/45

Although the single currency rebounded initially in H1 2011 to as high as 1.4940, the subsequent retreat after faltering below previous resistance at 1.5145 (Wave (II) top) has retained our bearish count that the rebound from 1.1876 is still the wave II of the series of (I)(II),  I II, impulsive wave structure from 1.6040 top (wave © top formed on July 2008).

Despite last week’s fall to 101.05, as the single currency has recovered this week after holding above previous support at 100.77, suggesting consolidation would be seen and retracement to 103.00 cannot be ruled out, however, renewed selling interest should emerge around 104.00 and bring another test of 101.05. Having said that, only a breach of said support at 100.77 (record low) would confirm major downtrend has finally resumed

Despite last week’s anticipated resumption of upmove to 0.9549, the subsequent retreat from there suggests consolidation below this level would take place and retracement to 0.9200/10 cannot be ruled out, however, reckon support at 0.9176 would hold and bring another rise later. A break of said resistance would extend the upmove from record low of 0.7068 to 0.9600

As the single currency has continued to fall this week and breached previous support at 0.8357, adding credence to our bearish view C leg has ended at 0.9084 and the decline from there is still in progress and indicated downside target at 0.8310 has been met, bearishness remains for further fall to support at 0.8285 but reckon downside would be limited to 0.8235-40 (1.236 times projection of 0.8831-0.8486 measuring from 0.8665)

Despite last week’s rise to 1.0423, the subsequent retreat has retained our view that further consolidation would take place and weakness to 1.0190-00 and possibly 1.0150 would be seen, however, still reckon support at 1.0052 would hold and bring another rebound later. A break of said resistance at 1.0423 would extend the rebound from 1.0052 to 1.0490-00 but break of resistance at 1.0524 is needed to retain bullishness.

Despite last week’s fall to 0.9862, this week’s rebound suggests caution on our short position entered at 1.0150 and indicated minor resistance at 1.0220-25 needs to hold to retain bearishness for another retreat later. Below 1.0050-55 would suggest the rebound from 0.9862 has possibly ended and bring weakness to 1.0000 and then towards 0.9950 but only break of said support at 0.9862 would revive bearishness for the retreat from 1.0382 to extend weakness to 0.9800

The single currency met renewed selling interest at 1.3714 (9 Dec) in line with our expectation (we recommended on 7 Dec to sell euro at 1.3700 for 1.3450) and price then resumed recent decline to indicated target at 1.3450 (with 250 points profit) and test of previous support at 1.3398 cannot be ruled out, however, a daily close below there is needed is needed to retain bearishness and add credence to our bearish count that wave iv has ended at 1.4380