Tuesday, July 20, 2010

Conflicts between the three Europeans persists

I was hoping the differing situations between the Europeans would clear themselves up yesterday. Instead they actually become more pronounced. Normally when I see this happening it will come down to one of two things: either I am looking at a count that will see a marginal new extreme and then followed by a deeper correction or; the trend resumes directly. At this point GBPUSD and USDCHF appear to satisfy the latter situation. It is EURUSD that I find more complex as ideally that should be correcting lower more deeply to both satisfy normal corrective behavior and also adjust the projections for what I feel will be the final rally to the final target. Right now the projections would imply a much higher target…

Clearly something needs to happen to correct this “imbalance” between the Europeans and that means a sharper movement in EURUSD compared to the others… However, attempting to forecast on that basis rarely sees the perfect eventuality develop. Therefore we are left with a dilemma that needs to be understood in order to be able to react when prices begin to react… We should also keep in mind that the Dollar downtrend has a time target around the beginning of next week which implies any correction now needs to be completed by today or early tomorrow to give time for the extension to meet targets.

USDJPY pulled back a little higher than I was anticipating. It is still a in a position where it is caught between two alternatives. I am expecting a move down to the 84.82 low and this also implies one of two alternatives: either we see a dip to the 85.70-90 area followed by a pullback above yesterday’s high before the final leg lower or; we see the pullback deepen directly to be followed by the decline to target.

Unfortunately, trying to decipher the problem is rather like a quadrilateral equation with three unknowns… I am actually more in favor of EURJPY having seen its high although there is a risk that we could see sideways consolidation. If I am right, then the question is whether USDJPY leads the decline or a bearish correction in EURUSD leads… It is further complicated by the fact that even if we see EURUSD correct I am still expecting quite a sizeable rally compared to a more limited decline in USDJPY and this still points to a fairly stable cross…

Therefore, right now the entire near-term situation is rather complex and this means we’ll have to be fleet footed to react as things develop. This should also be considered against the underlying backdrop of a still weak Dollar and the expectation of one more low before a larger reversal.

Today’s free analysis is for AUDUSD and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+0 pips)

Good luck
Ian Copsey

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

No comments:

Post a Comment