Tuesday, February 16, 2010

The weight of argument remains with a strong Dollar – the uncertainty is timing

Friday’s Dollar gains are pushing me much, much closer to the Dollar bullish camp. When I saw the move on Friday I thought I’d be strongly bullish and to be honest the bearish scenario is getting so tenuous I really don’t want to make this a prime view but just acknowledge that there is an alternative argument – more based on factors away from the main European currencies and also possibly even gold – that just keep the nagging doubts in my mind. For now they’ll be dismissed to the background.

Now, while Friday’s gains have deepened the bullish argument I still feel there is some short term uncertainty about whether it can follow-through directly. I tend to feel not… This would tend to suggest a move back towards the 1.3838 EURUSD high and down to the 1.0608 USDCHF low. This appears to be backed by what I feel should be a deeper pullback in GBPUSD and also an extension of the gains in AUDUSD. Once seen the Dollar can extend its gains further.

USDJPY has reached the 90.37 target plus 4 pips. However, I’m rather disconcerted with the lack of reversal lower and therefore I feel just a little care should be taken. I find the alternative structure that would suggest that the 88.57 low was the end of the pullback just a bit difficult to swallow. The implication would appear quite bullish. Actually, that’s an understatement – if what I’m looking at is right then a direct rally would look very bullish and target over 100 over the coming months…

It’s still not my favored view but it is an alternative to be considered. I’d still prefer this to decline – and I’m more bearish for the JPY crosses also and this does tend to slip hand in glove with each other. Certainly we’ll need a break below the 89.62 area to maintain the bearish side…

The JPY crosses are pretty mixed and the structure pretty messy. They do have a strong tendency to consolidate in very awkward patterns and until there is any stronger indication we should probably take a step back from these and wait until there is a stronger break.

Today’s free analysis is for GBPUSD and can be found on along with Friday’s Trader Package Review & trade Set up report (+170 pips).

Have a profitable week
Ian Copsey

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