Tuesday, July 27, 2010

Probability favors a continued push lower for the Dollar…

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

Well, the combination of time-based targets failed yesterday. It’s not a big bother and actually suits my outlook. However, I really do feel the final reversal is not a million minutes away… As is normal the pace of the extension between the four majors has been rather unbalanced with GBPUSD providing the stronger move which breached the 1.5470 high from two weeks ago while the remaining three amigos trailed in its wake. This is something which needs to be addressed by the latter group to ensure they all arrive at their anticipated destinations around the same time. This doesn’t look likely today but more by Wednesday or Thursday… Well, I could add Friday also if we are truly to see a totally uninterested market…

However, we should find things should heat up once the old Dollar lows are breached – at 1.3027 EURUSD, 1.0394 USDCHF and of course April’s 1.5523 high in GBPUSD. I find it hard to consider any major recycling of corrections now and therefore the move should be consistent at least. It’s just a matter of how slowly it develops. However, with the possible exception of GBPUSD it is difficult to see the daily Dollar bullish divergences breaking down at this point.

Just a note on USDJPY which dipped well after breaching the prior 87.56 high to apparently confirm a double bottom; The length of time spent above that high was sufficiently brief to suggest this was not a double bottom per se but merely a 3-wave move to complete a correction. The decline has been solid and while a small pullback is possible I feel this should be making its way lower to last November’s lows.

This is going to potentially throw a spanner in the EURJPY cross works… The price development of the latter, while bouncing perfectly from the 113.47 resistance has done so in a manner which tends to argue against the stronger rally I had begun to believe was possible. If it is to retain that higher target then EURUSD has to rally independently and leave USDJPY pretty much static. I do feel there is going to be one more high but we may have to be satisfied with somewhere a bit lower. I think we need to judge this as the cross’s parents arrive at their targets…

AUDUSD still bullish but seems to be slowing slightly but the coming high appears not to be the final one… USDCAD continues to confound and I remain wary of this pair until a stronger signal is generated.

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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