Wednesday, June 24, 2009

Today requires care ... but I have doubts that the Dollar can extend its weakness much more

Clearly the direct bullish Dollar view has been squashed after yesterday’s reaction. What is has done is complicate the entire picture and it has been a struggle to put together some (correlated) scenarios that could work.

At this point in time I feel the Dollar’s weakness against the European currencies is purely corrective. Just stepping back, if we are to expect a stronger rally in EURUSD then USDCHF must break below 1.0590. If USDCHF does break below 1.0590 it must get closer to the 1.0370 low to complete a full retracement. If it stalls anywhere above there then is limits the subsequent upside – and that is something I find very difficult to imagine given the cyclic structure.

If USDCHF gets to 1.0370 then EURUSD must move strongly higher above 1.4177-1.4212 and if that occurs, then it has only one month to decline 1,500 pips to the 1.2750-1.2850 target. That’s a tough thing to believe… Thus, I have to say that while the wave structure is exceptionally complicated, at this point this is just a correction and while it could last until the end of the week I find it difficult to expect EURUSD to get above the 1.4177-1.4212 area while USDCHF shouldn’t move below the 1.0619 level.

How this leaves GBPUSD is also very unclear… It almost looks as if it could reach a new high… Early trading should see a pullback but while it remains above 1.6365-70 I feel there is significant risk for follow-through further towards 1.6560-97 followed by a pullback. This may well imply a marginal new high once the correction is complete.

As for USDJPY – well I feel this is more a function of the JPY crosses. These have seen some sturdy corrections but I still feel the wave structure really implies new lows. Therefore I’m not really in favor of strong gains in USDJPY and the first resistance is around 95.88-96.07. While this holds the picture remains bearish.

So, while yesterday was a bit of a mess the trade set ups I post on actually provided quite a number of profitable trades. I do feel the mess can continue a little while longer but during this time I feel a little more caution is advised as the corrective price action has not yet come to a conclusion.

There are only a few more seats available for my seminar on price forecasting in Hong Kong on Saturday 27th June at the Excelsior Hotel in Causeway Bay. Please see for details and to register your attendance.

Good luck
Ian Copsey

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