Tuesday, November 23, 2010

One step closer to a larger move…

Finding Dollar buying levels finally turned out to be the right strategy although the rallies in EURUSD and GBPUSD were far stronger than I had anticipated. The break above 1.3775 frustrated but in reviewing I see a misjudgment in one leg of the move that had actually been a triangle in the EURUSD rally that forced a higher target. While the breach was not expected the end result is that structural progress remains on track. I still do not expect a new low in EURUSD. However, a new low in GBPUSD is more likely but should be the final stalling point for the larger rally to develop.

What is more confusing is the apparent refusal by USDCHF to respond with the vigor shown by its European buddies. This really does need to buck its ideas up pretty quick as if it moves much lower from current levels I’d have to begin doubting the final upside target… I actually prefer a neutral stance today just to watch what it does and which structure it will follow.

Now, what is of more interest is USDJPY and the crosses. While it didn’t really manage to get any higher than its early Monday morning stretch it has now developed into a more neutral balance in terms of structure. I have been on the sidelines here for some while, seeing an ambiguous structure building up that could spark a move in either direction. If this breaks higher then I feel it is more likely to be outright bullish. If it breaks lower then it has a choice now of further consolidation but more on the bearish side or an outright aggressive bearish structure.

Which will it be? Well, USDJPY is also still poised but seemingly with less upside risk and more downside. Even in the downside I can’t see it driving very far below the 79.70 historic low. On the assumption that EURUSD does indeed rally then the bearish consolidation scenario in the cross would appear more appropriate. If I’m wrong on EURUSD then the downside risk for the cross is substantial. My preference remains for a much stronger EURUSD and mildly weaker USDJPY which could see some losses depending on when USDJPY breaks down – but more likely an eventual recovery… What this love triangle closely…

On AUDUSD and USDCAD I am neutral today and waiting to see which way they break…

Overall, for today and tomorrow I feel we should be looking for Dollar selling levels…

Today’s free analysis is for GBPUSD and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+25 pips)

Good luck
Ian Copsey

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

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