Tuesday, October 26, 2010

The Dollar should make gains today… how far… well, that’s another story

I can’t say yesterday’s moves surprised. They were quite hard to actually forecast but within the general theme of daily Dollar bullish signals and intraday weakness the final outcome was quite satisfactory. From this point we should see the Dollar make some gains. However, the more important question is “just how much?”

As we moved into this anticipated daily correction I was considering a modestly deep one. I can’t really rule it out but I have a few nagging doubts. Yesterday’s stalling point in EURUSD was more indicative of a sideways consolidation which would imply that the 1.3696 low may well not be reached again. It is in one of those structures that could either remain in a consolidation or make stronger losses. However, the restraining factor for me is USDCHF which has effectively completed 2/3rds of its pullback higher and this drives me to the conclusion that we may not see EURUSD break from its range.

The how about GBPUSD? This has a rather ambiguous potential. For now I’ll remain conservative and suggest that it could initially remain in range but does look like correcting a little lower than the 1.5649 low seen already. However, if there is any price shock then a sharp drop cannot be ruled out. Therefore, for now it’s bearish but just keep in mind the structural possibility of a much deeper decline.

How about USDJPY? Obviously the market is eying the April 1995 79.70 low with lots of calls and opinions. Without a doubt it will break at some point but I am rather ambivalent about whether this occurs right now. Yesterday’s decline stalled 4 pips above my 80.36 target. Here I have a slight problem. That target was not a final one and indicates another new low. However, I am also mindful of a target implied by the daily chart around the 73.50-74.50 area but not convinced we shall see this directly…

I am also looking at EURJPY and still see this is a rather volatile period that can still see a small decline but then recovery before it can extend losses. Therefore matching the overall moves in EURUSD and USDJPY appears quite sensitive and for this period the progress of this corrective price activity I’ll remain rather cautious about this love triangle.

AUDUSD may just make a small retest of 1.0001 but I’m more inclined to the downside thereafter. USDCAD still needs to extend losses…

Today’s free analysis is for GBPUSD and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+10 pips)

Good luck
Ian Copsey

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

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