Friday, September 4, 2009

The European range trading should continue

With Monday being Labor Day holiday in the States the next report will be on Tuesday

So, we had a low in USDJPY that was confirmed on the break of 92.30-35. This will still be just a correction and I suspect we could get as high as 93.93-94.34 so it’s now a matter of navigating this correction. Of course the price development here has been painfully erratic and it’s rather difficult judging the correct critical turning points with so many ups and downs. However, the natural first resistance is at 93.05 and ideally I’d like price to get a little closer to bring the first rally to a halt. There is half a chance we’ve seen it already at 92.77 so be aware of the risk of a pullback at any time…

EURUSD and USDCHF performed the best and seem to confirm a triangle developing in both that should last through to Monday. The good news is… once this is done we will set ourselves up for a solid bearish Dollar follow-through. I remain with eventual targets of 1.4844 EURUSD and 1.0040 USDCHF and I suspect these can be achieved by the end of the month or possibly a little into next month. However, for today and Monday they should both remain confined to ranges – and for the most part that should provide a bullish Dollar today.

GBPUSD ended its rally a little early and if the assumption that it the movements here will be correlated to EURUSD then we’re going to see the correction lower continue today. However, I can’t see this progressing beyond the 1.6236-62 area. Following that we’ll either get a sideways move or even a possible marginal new high before reversing lower again. Overall there isn’t a lot of upside available here and overall I’ll be looking for the 1.6577-1.6651 area to cap the correction over the coming weeks. However, this could be particularly choppy so take care.

I should make a note about the JPY crosses also. I am rather in conflict here as I see USDJPY rising (erratically) while EURUSD should see more direct gains next week and as mentioned GBPUSD too, but also erratically. This tends to point to higher JPY crosses although I have to admit some confusion between momentum (which also seems strained on the downside) and I feel a marginally only bullish potential as I count this as a correction. Something here has to break so keep this in mind.

Today’s free analysis is for USDCAD and can be found on along with yesterday’s trade set ups (open position).

Have a great long weekend.
Ian Copsey

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