Tuesday, July 14, 2009

There must be a swift rally in the Dollar else breach of today's lows will cause a larger reversal

Not a lot went right yesterday. I can’t say the medium term expectation of a daily triangle in both EURUSD and USDCHF have been broken yet, but the wave structure to support this move is now being stretched to the point that we really need the Dollar strength to develop very quickly else the entire long term structure begins to take on a completely different look.

As way of background I have been looking for Dollar strength to emerge from September into early next year. However, this was seen as corrective only with the larger cycles still pointing to excessive Dollar weakness into 2012-2013. If the current Dollar bullish structure breaks down it begins to look more as if the weakness will start from here. Of course, there is always potential for recycling of corrections that can complicate matters but for the Dollar at this point in time the implication is that we are about to see a significant break out – and it’s all down to which of the current structures breaks down…

EURUSD is still just about holding below the 1.4007 resistance and USDCHF above the 1.0790-08 support. If these break it is going to be almost impossible – well, probably totally impossible, to maintain the Dollar bullish view…

USDJPY already has a Dollar bearish outlook although I’m less keen on an excessively bearish one at the moment (by that I mean a move towards the 87.10 low.) However, this point in time does seem to be pivotal and today it would be prudent to watch exactly what happens. I don’t like making excessive calls but we can at least react to break levels and see where this takes us in whichever direction…

So I’m going to leave the overall expectations today as neutral and wait to see how things develop and keep in mind the potential for a stronger directional move if we get a break out.

Today’s free analysis is for USDCHF and can be found on along with yesterday’s trade set ups (105 pips).

Good luck.
Ian Copsey

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