Wednesday, March 23, 2011

The market seems to be struggling for inspiration…

This week has been a bit like trying to squeeze blood from a stone… It seems to have prompted the market to concentrate on GBPUSD and AUDUSD both of which extended their rallies and in the process keeping short term momentum looking quite buoyant. These two actually look like extending those gains even further but doesn’t rule out an initial correction.

On the other hand EURUSD, which I had been looking to extend above the 1.4281 high, saw its rally peter out a little lower and appears to have raised the risk of a deeper pullback. It is approaching initial support areas but as long as yesterday’s high holds the risk does still seem to be lower.

This divergence of performance versus GBPUSD and AUDUSD does raise some surprise, even to the point of checking the daily structure. The rally from the 1.2858 low has done enough in terms of providing the basis for the larger Dollar bearish cycles to make their impact towards the end of the 2nd quarter or just into the 3rd quarter. However, I am keeping an eye out just in case I have misjudged the structure somewhere along the way which may lead to a minor extension still in this rally. Thus, while I am talking a correction right now this isn’t as clear cut as I would have liked.

As for USDJPY and USDCHF… patience is wearing thin… and getting thinner as much as the ranges are getting tighter. The more this happens the more the balance between bullish & bearish becomes strained and the risk of a sharp push and reversal possible. These two seem higher risk to me as the length of the consolidation adds confusion to the structures while momentum readings become almost irrelevant. I am more cautious about these two.

USDCAD should extend higher… EURJPY… I feel a correction lower only at this stage but that will mean USDJPY needs to buck up and start rallying…

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

Good luck.
Ian Copsey


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