Wednesday, August 25, 2010

The Dollar still has further to go but today has a chance of seeing the correction continue

Apart from USDCHF which continued to confuse and USDJPY which saw what the others were doing and decided to do the opposite… the Dollar gains were pretty much in line with expectations. First let’s cover the “normal” currency pairs that performed correctly…

EURUSD, GBPUSD and EURJPY all lost ground and remain the driving force for the Dollar’s gains and stalled at or close to projection targets, the former two being perhaps a little lower than even I had thought. The retracements from their lows have been sufficient in terms of depth to provide a complete correction but not to the fullest corrective potential. Thus, we have a degree of uncertainty over whether the downside just resumes or we see continued consolidation and possibly then the deeper corrective targets met. All have targets for this part of the decline around 150 pips lower. These lower targets should once again provoke a correction – but a correction only – so be aware of this if today sees direct losses.

USDJPY… the decline probably fueled by the decline in EURJPY. It has forced me to review the weekly and daily structures. This drop does seem rather contrary to the basic expectation of Dollar strength so I can’t see this negative correlation continuing but the question is from where it will bounce. To be honest I see an argument for yesterday’s low to be the final low – or perhaps a few pips lower… There is even a weekly bullish divergence now to support the daily one… All that’s missing now are the shorter term ones. Having said that, given the sharpness of the decline and the common fuzziness of the type of structure I am observing it will be best to remain careful but with the knowledge that this decline is unlikely to extend strongly now.

USDCHF… what the… Well, clearly what happened was not on my list of likely scenarios. In many ways I’d like it to carry on and reach that 1.0140 target but that seems a tough call. Let’s just say that in a perfect world it should but I wouldn’t want to put money behind it at this point. This one is best left to judge reactions.

Both AUDUSD and USDCAD appear to require deeper corrections and it’s this that keeps me erring in favor of the corrections in the “normal” currencies continuing.

Today’s free analysis is for GBPUSD and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+115 pips)

Good luck.
Ian Copsey

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

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