Friday, September 3, 2010

Balancing on a high wire…

Please note that as Monday is a U.S. bank holiday the next report will be on Tuesday 7th September

Yesterday was almost a non-day with very little movement and providing little in the way of opportunity. In that case it doesn’t really change the picture too much… It leaves the Euro holding above the supports I outlined yesterday and below the final upside target. If I have any preference it is down and up on the day to complete the entire corrective price structure though the degree of the initial “down” remains a case of seeing a reflection of a mirror within a mirror which causes the extent of the pullback to be a case of judgment when it occurs.

One of the reasons I tend to prefer this still is yesterday’s high in USDCHF and slightly deeper decline. It’s a bit tough to be certain because of the current erratic nature of its correlation with the other Europeans. However, yesterday’s high was just 2 pips off perfection and therefore I’d like to see this accelerate lower. The issue here is that it should be far more aggressive than the rally in EURUSD… Still, as has been seen on several occasions the Euro and Swissie can drop side-by-side anyway so the timing continues to be a little tough to judge.

However, another supporting argument is GBPUSD. Its failure to extend the rally was a strong warning signal of stronger losses. However, if that drops directly then we have to expect EURUSD to hang on to GBPUSD’s coat tails… It’s not impossible as the downside for both of them remains my underlying bias but it does seem a bit too soon. I therefore feel that we’re going to see GBPUSD continue its sideways consolidation. There are two potential ways this can occur – a shallow consolidation or a deeper one but with the latter taking a little more time – probably until Tuesday.

I also still see EURJPY having potential to reach its upside target also. Whether this is driven by EURUSD or USDJPY is something to be seen. However, while a potential bullish structure is one possible outcome in USDJPY it would imply quite a strong move so we’re going to have to be on our guard in case the cross recycles to just above the 109.55 high… What I do feel is that EURUSD will be the driver of the final decline in the cross so we have a puzzle of just how these three balance the books… Take care until all is clearer from the EURUSD perspective in particular…

Today’s free analysis is for USDCHF and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (-20 pips)

Have a great long weekend.
Ian Copsey

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

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