Friday, November 5, 2010

On track…

I needn’t have considered the possibility of extended consolidation yesterday. The Dollar has taken the more direct route and the downtrend is back on track. There’s still a long way to go in the larger picture but I suspect we’ll reach the half way mark by the middle of next week, just in time for the U.S. bank holiday on Thursday.

For today there is still further to go in the current leg but a correction will be due probably by the end of today which should last through to Monday at least to set up the final leg higher to the half-way mark as mentioned above. This basic pattern extends across all Dollar currency pairs with the exception of USDJPY it seems.

Indeed, USDJPY did falter and was dragged lower yesterday. I do remain bearish here though the speed of the decline I find a little uncertain. It’s possible we’re still in a sideways consolidation here but the pace of moves remains staggeringly complicated with horrendous microscopic adjustments interspersed with moments of sheer panic and terror that must be similar to how President Obama feels…

Many of you will know that I have been very, very bearish for a long time and that will not change for another 2 years. However, the structure of the decline has been rather a nightmare. Most comments I see are generally on the lines of: “how can USDJPY go down as the exchange rate is already killing exports.” It does seem to me that more emphasis is on the crosses as the Dollar is generally weak across the board.

I can only point to EURJPY as a proxy at this point as it seems most JPY plays are through the crosses these days. Yesterday saw gains extend in the cross but I don’t think this is complete yet. As with the expectation of another rally in EURUSD the prospect is the same for the cross rate. However, it does also seem to be coming to a point where a deeper correction is due and that is when I feel there may be room for USDJPY to finally pluck up the courage to retest the April 1995 historic low.

So the emphasis today is on the Dollar’s downside across the entire range of currencies, the potential for USDJPY to be the exception, before a correction higher by the end of the day and probably extending into Monday.

Today’s free analysis is for EURJPY and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+65 pips)

Have a great weekend
Ian Copsey

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

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