Friday, November 26, 2010

Dollar gains should extend further today

Dollar gains were seen on Wednesday as expected followed by a respite yesterday which is only normal with the States effectively on a 4-day weekend. Wave development has clearly slowed and this has impacted on momentum which has pulled back from its highs and presented the potential for divergences to develop. The question is whether the market continues to have a fire in its belly to maintain the furious Euro bearishness. Many appear to have a glint in their eyes remembering the frenetic decline that begun from the 1.5143 high exactly one year ago and apparently have begun tapping on their calculators to work out just how much profit they can reel in with short Euro before the end of the year.

I remain hesitant to get too bullish on the Dollar at this point. Certainly, the structure I had been following in EURUSD has broken down and the temptation has been to follow the long line of lemmings in their quest to jump over the cliff edge. However, I can’t say at this point that they won’t find plentiful manna at the end of the drop. At the same time I view the monthly chart and while I can see a more bearish alternative, the early stages of the move appear to be too swift to slot into that monthly structure.

USDCHF has been a curious animal of late but it hasn’t yet reached my target retracement resistance – the highest is way up at 1.0444. Even reaching there it could well still be in a downtrend. GBPUSD… well, that’s messy but has reacted with less strength to the Dollar’s resurgence.

Then when I view EURUSD within a bearish structure it needs a deep pullback first to make it more viable, at least as far as I can see. It also has the capacity to descend into a month or so of range trading which again doesn’t seem too surprising given that year-end illiquidity is just around the corner. As I mentioned on Wednesday, while the situation within the EEC is pretty dire most of the world appears to be competing on the basis of how bad things really are…

To sum up my thoughts, I do feel that there is still room on the Dollar’s upside and this should still remain the prime focus over today and possibly a little into next week, but I feel that unless the situation suddenly explodes to the Dollar’s upside we should be wary of just how far this move can extend at this time…

Today’s free analysis is for AUDUSD and can be found on along with Wednesday’s Trader Package Review & Trade Set up report. (+55 pips)

Have a great weekend
Ian Copsey

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

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