Thursday, November 4, 2010

The downtrend appears confirmed to me – but will this follow-through directly?

I mentioned yesterday that since we are in the early stages of this next leg of the Dollar downtrend there would be risk of a few “wriggles.” Well they certainly happened right at the end of New York trading. I am not completely convinced that they are over although and extension of this corrective price activity should not be with quite such frenetic panic as was seen a few hours ago.

Overall I found the moves very encouraging and even the “wriggles” fit very well into the entire structure. The only question in my mind is whether the downtrend will extend directly or see a recycling… However, the base waves of the new extension are basically set and do seem to slot in nicely into the sort of projections I am anticipating. As a market for the entire move the triangle target in EURUSD is around 1.4425-75 and that is probably the next intermediate target to go for.

Even GBPUSD finally made its move, a little tardy, but constructive never-the-less while USDCHF has been making steady downward progress although perhaps with less enthusiasm. The Swissie does raise some doubts due to this dragging of its heels but progress has been in the right direction.

More of interest perhaps, is the rally in USDJPY… It surpassed my expectations and brings the pullback to a level where it actually seems to be demanding more. It’s not impossible as EURJPY has also shot higher in quite an impressive display and is demanding more of the same. Now whether this implies that USDJPY will go higher, or EURUSD... or both… is one of those conundrums which needs to be watched with care. However, the 81.97 high in USDJPY is unlikely to be breached on any first attempt and therefore I doubt we’ll see such a firm display today. The more important issue is whether the correction turns into a consolidation that keeps the market on the quieter side today…

AUDUSD is looking extremely perky but does have some signs of bearish divergences. I don’t think this is going to cause a deep pullback though it does add to the potential for a day of consolidation. USDCAD does look bearish overall…

In summary, the underlying threat is for more Dollar losses and that should be always kept in mind. We just have to watch for signs of this emerging or whether the day turns flat with the market potentially suffering from the late “wriggles.”

Today’s free analysis is for AUDUSD and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+0 pips)

Good luck
Ian Copsey

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

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