Friday, December 10, 2010

Momentum is slow and may retain the consolidation but keep a watch on the Dollar upside

Daughters’ and their cuddly toys lying on the floor… cloud the picture and that caused those whipsaws about which I had warned some care. I am still very wary of this December market. Corrective price activity due to low liquidity can cause the most complicated corrective structures and this makes me approach the current market with a lot of caution.

Even as I went through the currency pairs I found myself Dollar bullish on one and bearish on the next… then bullish again. It doesn’t make for confident calls. However, one currency that stood out was EURJPY. It’s still early days but yesterday’s peak came in right on target and one that implies significant losses. Well, that does mean one of two things: either USDJPY is going to take a dive or EURUSD will…

Well, EURUSD was one of those currency pairs for which I felt a Dollar bullish view had legs. I am only mildly bullish USDJPY. That would take care of the downside for the cross… However, the cross still appears to have a modicum of support for the correction higher to deepen but I suspect it should break lower again later today.

The Aussie looks bearish too… It’s just GBPUSD and USDCHF where I feel less inspired by the Dollar upside.

I therefore intend to start the day with a more neutral stance and watch what happens once EURJPY has corrected sufficiently to suggest another leg lower may occur. I should warn that even with a new low the next risk is still for a correction higher and probably quite deep. Therefore I feel we should avoid expecting particularly aggressive Dollar gains just at this point.

Beyond these comments the by-word for this time of year remains caution. I should remind that it is a particularly flaky time of year where relatively small orders can generate excessive moves. Such is the reluctance by major market players to risk any loss reducing bonuses the preference is to remain square and keep the current bounty. However, with such thin liquidity it can send daughters’ block towers tumbling in an instant…

Today’s free analysis is for USDCHF and can be found on along with yesterday’s Trader Package Review & Trade Set up report. (+190 pips)

Have a great weekend
Ian Copsey

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

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