Monday, October 25, 2010

There is still short term confusion but the larger picture appears to point to a higher Dollar

The indecisiveness of Friday’s General Outlook indeed reflected what was happening in the market. Looking at the shorter term wriggles and whips (a.k.a. corrective price action) I find the overall situation really hasn’t changed. What I did find from a weekly indicator wrap up was a general indication that the Dollar is due to correct higher…

As you will know, this has always been my preference and supported by the same expectation in the DJIA and gold. However, the shorter term really hasn’t cleared that much and provides a general confused mess. I am therefore tending towards a stronger Dollar but with a short term caution being generated by a very unclear picture which will either continue with the current status quo – that is further consolidation – before the Dollar finally manages to wrestle up enough strength to push through to new corrective highs.

This doesn’t alter my overall Dollar bearish view and this should always be kept in mind in case it does just follow-through directly, but all round, including the DJIA and gold, the implication is the same – a daily pullback before the trend resumes.

However, once again I’ll point out the influence from EURJPY. This didn’t quite work out as I had expected but then remain broadly in line with my underlying feeling that we still have a second dip lower to come before a recovery to complete a correction within a larger decline. This is more in line with a larger bearish view which could initially be fueled by a lower EURUSD but given I feel the downside of EURUSD is limited it is highlighting (probable later) potential for USDJPY to extend a little sharper lower.

I have to say this is still a little hazy in my mind in terms of the impetus required to generate enough thrust for the cross to reach down to around 100 and therefore I’ll take it step by step and we’ll need to observe exactly whether the thrust develops or not.

AUDUSD is also included in the general Dollar strength. USDCAD still appears to need a slightly deeper correction lower.

Today’s free analysis is for AUDUSD and can be found on along with Friday’s Trader Package Review & Trade Set up report. (+60 pips)

Have a profitable week
Ian Copsey

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

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