Wednesday, June 2, 2010

All that yesterday’s price action added was complications…

Erratic? That just about summed yesterday up... Often such sharp moves can narrow down the alternatives to be considered and certainly it did take out one or two I have been observing. However, the reactions from yesterday’s extremes have introduced additional complications in terms of identifying correlated movements across the European currency pairs.

Just to point out what I feel are key issues:
GBPUSD reached its ideal retracement resistance for the correction. However, there is a deeper one at 1.4810.
The 1.2110 low in EURUSD appears more likely to be related to the 1.2446 high but the depth of the recovery rules out a normal complex correction which renders this pair open to a new low and recovery or perhaps a much stronger rally to retest the 1.2670 high. However, this would imply a break of 1.4810 GBPUSD…
The move in USDCHF could be considered a complete correction which would imply the underlying rally resuming…

There appears to be conflict between these apparent scenarios which are hard to reconcile. Therefore I’m going to be pretty conservative with the analysis today and outline both sides of the coin as best I can. Very briefly it would appear that either we’ll see direct Dollar losses to marginal new lows or the risk of direct follow-through in the larger Dollar uptrend… What will be important is identifying just where one scenario breaks down to confirm the alternative.

However, one pointer may well be EURJPY which I feel stands more chances of recovering. This may well develop from a stronger USDJPY (which itself also has a few issues) but the sort of recovery I’m looking for would probably require both EURUSD and USDJPY to remain firm to strong.

AUDUSD looks like remaining in range but probably with a downward bias. USDCAD must rally above 1.0565 else it risks a second decline…

In summary, today will require some observation to identify the most likely outcome by watching for factors to make or break alternative scenarios. Until any definite directional move develops take care.

Today’s free analysis is for USDJPY and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+55 pips)

Good luck
Ian Copsey

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

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