Wednesday, December 1, 2010

A mild pull back is possible but the underlying Dollar risk remains higher

On the whole I was satisfied with yesterday’s moves. Not all targets were met with accuracy and GBPUSD dipped lower than expected, but otherwise the basic anticipated directional moves developed. The Dollar highs against EURUSD, GBPUSD and AUDUSD all appear to be intermediate projection levels which means there should still gains ahead. However, bullish momentum has become stretched and the first move today is therefore more likely to be corrective.

Now, here is where I see some potential deviation between EURUSD and GBPUSD & AUDUSD. The latter two appear to have reached supports which appear to indicate a slightly longer correction while EURUSD does still appear to require one more extension lower. I do have some reservations since there are bullish divergences here which should be acknowledged. I shall provide the resistance levels here which I feel will cap for the next leg lower. However, any breach of these resistance levels will bring these three into correlation.

USDCHF dipped lower as I had preferred, and quite against the Dollar gains seen elsewhere. It didn’t quite reach the support levels I had been looking for but probably this was enough and the implication is therefore still for Dollar gains. It would seem that for today USDCHF and EURUSD may well be correlated for a change.

USDJPY also dipped as warned. I’m not sure the pullback is complete. Certainly it has done enough to complete a correction but the lack of an hourly bullish divergence and the risk of one final dip should be recognized. Overall I do feel this will see one more rally but doubt now whether this will be able to break above the 85.92 corrective high.

This should prevent EURJPY from repeating it’s super-bearish performance yesterday. I do look for the cross to trade quite similarly to EURUSD – that is a correction higher followed by losses but it seems that the bulk of the move has occurred. From the new low – as with my expectations in EURUSD – we should see a longer lasting correction before another bout of losses.

For today be aware of critical break levels and the potential for a solo Dollar rally against the Euro (maybe slightly against the Yen) but from then a period of correction.

Today’s free analysis is for USDCHF and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+110 pips)

Good luck
Ian Copsey

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

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