Time for Dollar losses to resume?

Well, that was a bit of a mess yesterday… but then it was always going to be a trying day… However, there were a few pointers that came out of yesterday’s price action that have required a reshaping of the rear guard and what looks to potentially be a resumption Dollar losses.

First & foremost EURUSD saw a deep move lower and stalling in an area that satisfies the pullback in terms of ratios. It could be complete but there is a small risk that we could see one last attempt to reach the maximum pullback.

Next are the developments in the other Europeans. USDCHF did not reach the 0.9080 target but if the Dollar resumes its losses in earnest it certainly won’t stop at 0.9080… If there is any chance it will be that EURUSD decides to choose the snafu option of the mildly deeper correction. However, that said, GBPUSD broke above the all important 1.5774-79 highs. It hasn’t taken off yet but could do… To be honest, I prefer that it does extend gains today and that would imply (as long as the other two keep up) that we’ll begin to see the Dollar begin to wilt today.

Another little clue to look for is from the EURJPY cross. It dipped just a bit more than I thought but within boundaries of a pullback. Now, if this gets much further lower it will begin to suggest a move right back down to the 97.03 lows… However, at this point I can’t see USDJPY carrying that burden so unless EURUSD confounds by dropping the argument does seem more bullish for the cross. I don’t see it making excessive new highs and actually quite limited – but that is more in line with what I see in a push higher in EURUSD and then reversal. While USDJPY can still make downward headway it should be a lot more choppy and with at least one deep pullback.

Thus, cautiously, I feel the argument for Dollar losses to resume today are quite strong… If not then we’re in for some weirdness…

Good trading

Ian Copsey

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The rest of the week is going to need some deep TLC…

It was a case of the good, bad and the ugly yesterday. Well, not too ugly. The deep pullbacks in EURUSD and USDCHF began to develop well. Actually USDCHF was close to perfect ending only slightly above the retracement target. Where things went a little wrong in particular was EURUSD where price retraced all the way back to the 1.3077 low plus another point. GBPUSD sagged and USDJPY wilted earlier than expected… Overall, looking at the general equilibrium of all currency pairs it certainly looks as if we are at a crucial juncture between marginal extension of Dollar losses and a longer sideways correction. Even if we see new Dollar lows they’ll be limited and the long consolidation develop.

The legacy of all these moves, if a team of lawyers got involved, would be a long, drawn out case that would drag on and on until a crack opened. Actually, I think that probably adequately describes the situation we face now. The high in EURUSD could be considered a completed intermediate move; the low in USDCHF doesn’t really fit into the normal projection ratios and would still risk marginal new lows. Indeed, I think I prefer that. In fact it may even suit the overall situation since the correction in USDCHF is expected to be much shallower than EURUSD.

That sort of leaves GBPUSD hanging rather in the middle and doesn’t seem to have any obvious structure to follow but perhaps that’s the reality given we are, overall, due this period of messy correction… The Aussie appears to be in the same boat. I’d much prefer this to extend gains and it must now or suffer the same fate of messy consolidation.

However, taking up the strain is USDJPY that failed in the pullback but extended losses more directly. I suspect we’re due a deeper pullback but probably not before another bump lower. Overall, rather than the broader consolidation I had been expecting to develop this now looks more like seeing a retest of the 75.57 low… and I wouldn’t be too surprised to see 75.57 again…

Good trading

Ian Copsey

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The Brief Harmonic Daily Forecaster

The Brief Harmonic Daily Forecaster

Close to the next bigger stalling point… but how close?

Friday was good and the Dollar’s still on course in its move lower. Indeed, Friday’s lows came tantalizingly close to reaching those targets so the question is whether it’ll move directly through to those targets or see a correction first. I reckon the latter and it could – or should is more appropriate – be quite deep. From this supposition it’ll mean that it’ll take until European and more likely American trading to reach the target projections.

Once reached the implication is for a correction/consolidation and not just a modestly firm pullback but one that should be quite complex. For non Elliotticians complex can form a flat correction – so a retest of the high we should see later today before recycling, an expanded flat which will imply a marginal new high before recycling or possibly a triangle. The bigger headache I have is that the pullback in EURUSD should be quite deep, in USDCHF quite shallow but sideways complex while GBPUSD may well continue to make new highs…

Therefore, today looks like the simplest of all days with the prospect over the rest of the week being for some rather confusing trading.

A word on USDJPY that has obviously taken the bearish option… Something, or someone, appears to have poked a sharp stick up its backside… The past 4 days has seen a combined range that must be the equivalent of 10-12 days of what we had before. It’s broadly following the general Dollar bearish developments and should continue to do so for a while longer. So while there is risk of a minor new low early on we should actually see a pullback into the end of the day. This has made the rally in EURJPY from 97.03 to look more corrective. USDJPY itself has been so complicated over recent months I still prefer to take this one step by step but I’m not so sure the cross has much upside left in it. This could be a crucial indicator to the movements in USDJPY while those in EURUSD appear, at this point until a wheel falls off, to be quite clear.

Have a profitable week

Ian Copsey

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Further Dollar losses to come today

Dollar losses extended yesterday, a little more directly than I had anticipated but to the sort of areas expected – in EURUSD to the very point. The additional developments have solidified the structure a bit more and barring any consolidation the greater risk is for the week to sign off having seen new lows. However, this should generate a mildly longer lasting correction before the next leg lower but that should come next week.

The early part of the day in Asian trading should see consolidation and a mild extension of the current correction. Possibly this could extend slightly into Europe but I can’t see it lasting through to N.A. open and thus look for the Dollar to resume losses by early in the European day.

USDJPY saw the expected decline and has stalled within 3 points of my target. This is now critical support and the fine line between bullish and bearish. That EURJPY is also hovering around retracement support may not really have too much impact on USDJPY given that EURUSD is expected to rally. However, I feel we should see a recovery but which may well be subdued. I’d like to think that it could make new highs above 78.28 but given the recent aversion to trading USDJPY I’ll remain more prudent. Let’s just say that if USDJPY manages to break above 78.28 I think the argument for having seen a major multi-year low at 75.57 rises significantly.

That’s about it… In summary, selling into this Dollar correction should set us on course for a decline into the end of the day…

Have a great weekend

Ian Copsey

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The Dollar looks extremely vulnerable…

Yesterday went right down to the line – the FOMC one – and sparked the resumption of Dollar losses. Indeed, the outlook for the Dollar does not look healthy at all and as warned, once the correction had ended the risk was for potentially substantial losses. Therefore, it should now just a matter of the correct pullbacks but within a predominantly bearish direction.

Having said that there are intermediate barriers to watch out for marked by key swing highs/lows that could well contain the move today. The 1.3197 swing high in the Euro is one, the 1.5774-79 highs another. I can’t see that they’ll hold for too long but definitely areas to exercise additional care. Overall I feel this can be quite a direct move.

USDJPY… retested the 78.28 high precisely and dropped. However, if I look at the manner of the rally I can see potential for yesterday’s high to only be part of a stronger rally. There should be support not too far below where we are now so if this doesn’t get below 77.00-20 then be aware of another leg higher… That seems to be echoed to a certain extent in EURJPY but to a lesser extent before a pullback. That could either be generated by a break below 77.00 in USDJPY or that we merely see a holding pattern for USDJPY before stronger gains… Again, this is something to observe and be aware of the alternatives.

Finally, the Aussie is very much in the same position as the Europeans… gains expected here too…

Good trading

Ian Copsey

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Flip of the coin…

The market sure seems to be bent on selling Dollars… Further marginal new lows yesterday, in EURUSD and USDCHF just about holding to extreme projections while GBPUSD has moved beyond that. Just commenting on currencies alone the depth of correction is pretty much an unknown quantity. The Dollar bearish structure is within an internal correction that can be limited to as little as 23.6% but can go to 85.4%. So from that perspective the range is not too helpful. What’s more, the projections for the next leg lower can be absorbed quite comfortably probably from either extreme of the retracement, though a 23.6%-50% area would be the most likely.

I have actually based my expectations more on the U.S. Indices. Monday’s highs were all projections I’ve had for 2 weeks or so, imply modest pullbacks that should take some while to complete. Hence the call for deeper corrections in Forex.

Today, I am told (as I really don’t take any notice of fundamentals) is the FOMC. Normally that implies pretty dormant trading for the next 20 hours… So from that perspective we can probably take our cue from the release. In terms of Forex we can only but acknowledge that the major direction is Dollar bearish (against the Europeans) and thus any further weakness could well release any restrictions and fuel additional losses that do suggest quite a solid follow through on the downside. Otherwise look for a day or two of continued correction before that move develops.

A word on USDJPY… It saw strong follow-through higher and is close to a pullback itself, but not by too much before it can make it back to the 78.28 high and possibly just above. How it reacts at that point could determine the move into the end of the financial year…

Good trading
Ian Copsey

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