Tuesday, June 16, 2009

We should see a small correction today before the Dollar uptrend continues

Oh well… right… The Dollar does really want to rally strongly… Yesterday went pretty much to plan overall in terms of seeing persistent gains over the day and in some areas stalled around the areas I was expecting but the thrust below 1.3805 EURUSD was more than I had expected at this stage. Keeping in my mind the 1.2750-1.2850 target in the 4-6 week time frame I had thought this to be bearish enough for now.

However, there are signs all round that this rally could well follow-through directly… by this I mean that if we see certain resistances break then we could be talking the 1.3613 EURUSD, 1.1095 USDCHF and 1.6006 GBPUSD by the end of this week and by the end of next week even higher (for the Dollar).

However, I don’t think we’ll see much more today. There is risk of a marginal new high in the first half of the day – could well occur in Asian time – but then we will be due a pullback. We’ll have to be a bit flexible on buying into that pullback since this the limit of this correction will be dependent on where the current high actually completes.

So, apart from the earlier part of the day, the main direction should be lower today for the Dollar but I don’t think this will be a particularly direct or strong move. More likely it will be choppy so watch your entry levels and stops.

Looking over at USDJPY this came off over yesterday and as I’ve been writing this outlook it has dipped further. I’m not sure we should turn our heads and become strongly bearish. It should mean extension lower but there is no escaping that it has been a very erratic pair of late and I can still see a scenario where this will continue. The break level to switch to more strongly bearish is at around 96.13 still.

Even the JPY crosses all fell off yesterday and it seems as if they’ve found a top slightly earlier than anticipated. Indeed, that does look like a trend that will develop but with the expectations of a correction in Dollar-Europe and the fall in USDJPY the risk is that we’ll see a pullback soon. In the medium to long term I do feel the direction is lower but if the 96.13 USDJPY support holds it can still move to a new corrective high above 98.87. The downward drive in the crosses is more likely to come from the weakness in the European currencies. If USDJPY drops below 96.00 then this could well imply significant acceleration lower for the crosses… Best if this balance is kept in mind.

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

Good luck.
Ian Copsey

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