Tuesday, September 15, 2009

Today requires some care though I have tended to side with an initial Dollar recovery before losses

I started the analysis this morning with some fixed views. I ended looking at the charts and muttering to myself “what a mess…” What had appeared straight forward has turned into a structure with as many twists and turns as a mountain road. Needless to say, this is going to require a great deal of care.

Let’s step back and consider the basic picture. I am Dollar bearish. That is understood but if I look specifically at EURUSD and USDCHF I feel that the pullbacks we saw yesterday stall around the right levels – maybe a bit short – but from this simple observation we could suggest the downtrend should continue directly. However, there is a guideline in Elliott Wave that deals with alternation between corrective waves. If you look at the marginal new (Dollar) lows seen yesterday these would fit pretty well into this scenario – although this morning these have broken but only marginally. If I have any preference it still is for a return higher to just beyond the Dollar highs seen yesterday.

One of the reasons I like this scenario is because I’d rather see GBPUSD back down at 1.6482… However, this morning’s recovery to retest 1.6629 is rather strange to say the least. On top of that USDJPY has refused to generate any weakness and I am watching this for an alternative structure that could see 91.40 before the decline to 89.52. This also suits the initial Dollar bullish preference within a correction in the larger downtrend.

However, AUDUSD looks firm and does suggest a push higher while the JPY crosses have seen moderately strong firmness. I’m not sure they have much further to go but here too there is conflict between the JPY-Europe and JPY-AUD pairs. So again the correlation one would expect is being threatened.

In summary, all I can say is that my preference remains short term Dollar bullish but if we see much more weakness from this point we may have to switch to pay respect to the medium term outlook which is still bearish Dollars – and this scenario would probably see some solid follow-through so best watch over your shoulder.

Take care and watch levels and implications carefully.

Today’s free analysis is for USDJPY and can be found on along with yesterday’s trade set ups (0 pips).

Good luck.
Ian Copsey

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