Friday, September 24, 2010

Today may see a slow start but I fancy Dollar strength by end of day

Yesterday provided mixed reactions… The Dollar lost out against USDCHF and GBPUSD but gained against the Euro… I have a feeling we’ll see more mixed reactions today as well although with a more uniform Dollar downside but this may well take until the second half of the day to develop.

The move lower in EURUSD doesn’t look complete and I feel even USDCHF could correct just a little higher too though not by too much. The corrective target in EURUSD isn’t much lower than yesterday’s low and basically I feel the first half of the day will be spent allowing this mild extension to develop. This should then trigger the next leg lower in the Dollar with EURUSD having to move further to reach its target compared to USDCHF. Thus expect some movement in the cross.

What I am less certain of is GBPUSD. Yesterday’s rally was far more erratic than expected and almost to the point where I could even conceive that yesterday’s high will not be broken. It’s rather touch and go. Even if it does make a new high I don’t expect it to be by too much. The difference between GBP and the continental couple is that the rally in GBPUSD actually looks more like part of a correction that would imply a return to the 1.5503 low again… This is not necessarily a mismatch between the three as once EURUSD and USDCHF have extended their trending moves there will be risk of a deeper correction. The issue will be how they all coordinate their respective moves since EURUSD needs to move more rapidly than USDCHF and GBPUSD really appears to have little elbow room…

Just as a caveat, if the initial EURUSD decline breaks its support the implication is actually very bearish so be aware of that threat…

EURJPY is balanced and we’ll have to work with breaks. I am still working on the basic assumption that we’ll see gains extend back to 114.73 and maybe a touch above. The question is whether it will make this rally directly or after a recycling back to the 111.46 low… Assuming EURUSD rallies today this does seem to suggest that the upside will be more at risk and does seemed to be backed by a bullish divergence in USDJPY also.

AUDUSD – dropped as expected and I feel there’s more to go. However, be prepared for a deeper pullback higher before that next decline develops. As mentioned above, assuming I am correct with the anticipated follow-through in EURUSD and USDCHF then we’ll be talking about the Dollar correcting higher all-round. Watching individual targets and timing look important today.

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

Have a great weekend.
Ian Copsey

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

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