Friday, June 19, 2009

Early trading could see some pullbacks but the Dollar should end the day higher

After all yesterday wasn’t quite as complicated as feared and in may way behaved close to expectations. I do feel that the structure is beginning to emerge from behind the clouds and thus the Dollar should be heading higher today.

Early trading does look like seeing a small extension of the gains seen already but following this into European and possibly even NY trading the risk then seems to be much higher for the Dollar.

More than anything I think the immediate focus should be on navigating the first stage of all this. First of all GBPUSD looks bullish and this may have the strongest impact running into Europe. The implication does seem to be for a move direct higher to 1.6507-24 again but only go with this if the 1.6397 high breaks. If it holds then the downside is going to break through quickly.

Indeed, this type of modest initial trading followed by what appears to be the risk of a stronger impulsive move is common across the board. The near term Dollar resistance barriers are around 1.3810-20 EURUSD, 1.0910-20 USDCHF and well, GBPUSD should have already found its corrective low. If it moves below 1.6282 then the upside game is over and the downside will begin to add pressure. Indeed, when all those resistance barriers give way the extension could be quite sharp…

USDJPT spent another day of gentle movement and seems to have found its low. Here the resistance is at 96.77 and I feel a pullback is required before that can break. I don’t think the Dollar gains, when they come, will be quite so strong as in the European currencies. Overall the first move in this sequence should eventually challenge the 98.56-87 area – whether it gets there today is a different question – probably not quite.

We have to match what I have described above with the expectations in the JPY crosses. These do appear to have room for a quick push higher to around the old corrective highs at 135.36 EURJPY, 160.38 GBPJPY and 78.37 AUDJPY. However, take care with these as they all have the same pattern that ideally make marginal new gains – but the crosses can tend to fall short. However, these too also suggest that once the correction higher is complete the next move will be lower – and this is why I suspect that Dollar-Europe will outperform Dollar-Yen.

Take care – could be a whippy day but the signals are there for a good move later today.

Today’s free analysis is for EURJPY and can be read on along with yesterday’s trade set ups.

I shall be presenting a seminar in Hong Kong on Saturday 27th June at the Excelsior Hotel in Causeway Bay. Please see for details.

Have a great weekend.
Ian Copsey

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