Monday, May 10, 2010

The EU announcement has forced the Dollar lower but I think we should still take care

So… the EU has a huge fund to protect the value of the Euro. Unsurprisingly this has forced the Euro higher this morning and it may seem as if the larger Dollar rally is complete. I do have a projection close to the 1.2518 low that would imply a major low. However, I’m really not convinced that we’re going to see direct gains. If I look at USDCHF, GBPUSD and even AUDUSD I can’t see that they’ve completed their depreciation against the Dollar. It does therefore imply that we still need to take gentle steps at this point.

There do seem to be quite clear reversal levels in all of them and therefore I shall detail these in the individual analyses today. However, until these are broken I still have a mild preference for the Dollar to resume its gains over the course of this week. However, these shouldn’t be direct and there could mostly be some range trading interspersed by sharper moves that may well be driven by announcements and further developments in the EU farce.

Before the Dollar does resume its uptrend I still suspect that we could see some additional strength in the Euro. This is where the larger risk lies as USDCHF and GBPUSD appear to have reached the limits for their respective corrections. This will mean that the Euro must make its moves unilaterally. Any unison in Dollar losses would place a bigger risk on the possibility of a larger Dollar reversal to the long term uptrend.

USDJPY rallied more directly than anticipated and may well be displaying a solid uptrend. Right now there seems to be risk for a sideways consolidation but all being well, once this completes the upside should resume. That should also drag EURJPY a little higher but assuming EURUSD reverses lower once it has completed it correction then downside will develop. I see the recovery in EURJPY as part of a daily correction and thus this should last a little while longer.

AUDUSD… close to its retracement target on this morning’s push higher – that still has downside risk towards the old 0.8578 corrective low.

USDCAD… played its usual “Loonie” self in breaking supports and therefore has more downside risk. However, in the larger picture I still see a second rally so we’re just going to have to bear up with the correction which, if this currency pair is true to form, could be pretty messy so take care.

Today’s free analysis is for AUDUSD and can be found on along with Friday's Trader Package Review & Trade Set up report. (+195 pips)

Have a profitable week
Ian Copsey

FX-forecaster Trader Package now available at €20.00 pm
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