Monday, February 14, 2011

Friday’s moves suggest we’re going to get a stronger Dollar but it won’t be direct…

Friday looks to have sorted out the wheat from the chaff. The key signals came from all four majors but more precisely from USDJPY, USDCHF and GBPUSD. All broke Dollar resistances that could have kept them in trading ranges and appear to have opened the way for gains over the medium term. However, while there should be further strength seen today and perhaps into tomorrow the current move is approaching completion.

These should cause corrections in all four but EURUSD does still stand out as a possible black sheep of the family. I am open to what happens but the decline this currency will make today will probably leave it in the balance and one that would still retain the potential for new highs. The key will be the relative movement across the four…

For today the risk appears to be for a mild pullback to Friday’s gains. Not by too much but I can’t see that we’ve seen a completed correction yet. Once that’s over with then we can plan the next rally and for the subsequent correction.

Just touching on EURJPY as I feel this may point to the a possible divergence of movement between the two intrinsic currency pairs, it seems to me as if the cross has stumbled in its attempt to push higher. I can’t see a massive reversal but more a period of range trading above the 110.77 low. With USDJPY looking quite bullish for the medium term I will expect a break higher at some point but probably not until the anticipated Dollar correction is complete.

One other point for the followers of U.S. equities, it looks very much as if we’ll see an intermediate high in the Dow & S&P this week – and my targets are at 12,325-3355 and 1,345-50 respectively. These highs should spurn drops of 450-550 points and 120-140 points respectively… It does suggest something is afoot…

So, look for Dollar buying levels midway through today and for the final push higher of this section of the Dollar rally.

Today’s free analysis is for EURUSD and can be found on

Have a profitable week
Ian Copsey


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