Wednesday, March 3, 2010

The Dollar appears to be recycling the correction against the Europeans

All looked well for a while yesterday, the Dollar pushing up higher and even forcing a marginal new low in EURUSD but then completely reversed. I am treating this more as a recycling of the overall correction and should therefore imply a test around the 1.3687 high in EURUSD and potentially the 1.0665-95 area in USDCHF.

However, there is one possible “catch” to this scenario as a break above the 1.3687 high would actually confirm a double bottom. We’ll have to treat this with care and just ensure that the shorter time frames confirm a bearish divergence at that area for any significant breach it could set off a string of stop loss orders that could provoke quite a strong follow-through – and remember the Dollar bearish divergences in EURUSD and USDCHF daily charts…

I’m still hanging my hat on a resumption of the uptrend and while the start may be a little choppy it does still seem to be the more logical implication.

The renewed strength in EURUSD is providing GBPUSD with a new lease of life… but probably only a short term lease… I had mentioned yesterday that I felt the ideal was for a slightly deeper pullback and this seems to be playing through. While 1.5170-80 caps the downtrend still remains in place.

Watch USDJPY as this appears now to be setting itself up for a more decisive reaction. The 88.33 area is the crucial support and while it holds (with a solid bullish divergence in the 4 hour chart) it could generate a more sustainable correction. Much below 88.30 and the scenario will turn itself on its head and extend losses by over 100 pips…

Finally, just to cover the JPY crosses – well, it all rests on the shoulders of USDJPY really. I am more bearish in the medium term but there’s sufficient choppiness to suggest we may still be in the midst of a correction. Once they break lower then the move should accelerate but until that point take care.

Today’s free analysis is for EURUSD and can be found on along with yesterday’s Trader Package Review & trade Set up report (+80 pips).

Good luck
Ian Copsey

FX-forecaster Trader Package now available at €20.00 pm
For MT4 users

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