Wednesday, July 28, 2010

Price targets have not been met but there are growing signs of a reversal

Please note that The Daily Forecaster will be taking its summer break from the 9th-13th August

Price targets have not been met but there are growing signs of a reversal

Yesterday sprung a few surprises… The rallies in USDJPY and USDCHF actually matched the rallies in EURUSD and GBPUSD… well, sort of… Furthermore, USDJPY & USDCHF confirmed their respective double bottoms which tend to point to a retest of 89.14-21 and 1.0730-50 respectively. Indeed, these look good structurally also.

All this has put me in a slight quandary. GBPUSD has already met its minimum upside target but EURUSD has not… However, it has approached an area which is implied by a more complicated pattern that would imply a recycling all the way back to 1.2670-1.2731… That’s over 300 points which appears rather dramatic and would be contrary to the indications seen in EURJPY… Meanwhile, GBPUSD has come to a point where it needs a correction from yesterday’s high.

Now, given that 3 out of the 4 majors are signaling a correction I can go along with this. I do envisage the moves in USDJPY and USDCHF as corrections and therefore should still point to new lows. A high in USDCHF around 1.0750 will imply required losses of around 600 points, from 89.21 USDJPY around 450 points and from an anticipated 1.54-ish type area in GBPUSD a rally of 300 points or if aggressive then 400 points. These could all work out but it does leave the situation in EURUSD somewhat clouded and this is where we need to take care.

I should add the same caveat I mentioned on Monday in which I did warn that bullish Dollar divergences are building up in the daily charts – and this now includes EURUSD after yesterday’s marginal new high – so while I am persisting with the view that we still need further Dollar losses all round we have to remember that EURUSD has made a standard bullish correction already and now even GBPUSD has met minimum targets. It still does leave USDJPY and USDCHF a little mixed but given the fact we’re talking about weekly patterns I these two I wouldn’t fight too much if we start seeing a stronger Dollar recovery. It is still best to keep this alternative in mind.

AUDUSD is pretty much in the same boat but does concur with the need for a correction now. USDCAD is poised between retesting the 1.0138 low and just following through with the bounce from 1.0255…

Today’s free analysis is for EURJPY and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+75 pips)

Good luck
Ian Copsey

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

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