Monday, April 18, 2011

The Dollar is poised to resume its losses… but probably not today…

Friday was close to expectations, mainly a Dollar positive day in general though not quite uniformly. Indeed, from the look of EURUSD and GBPUSD there does still seem to be a little more to go before the downside resumes. There are a couple of basic patterns within this outlook, the first being continued sideways consolidation and the second a deeper correction higher for the Dollar before it caps out. However, there doesn’t appear to be a uniform development that would satisfy all currency pairs.

For example, I can see definite potential for GBPUSD and EURUSD to remain in sideways consolidation. This would tend to suit USDCHF also, and potentially USDCAD. However, from what I can see, AUDUSD actually needs a deeper pullback, probably a recycling to its recent swing low. That would be acceptable in GBPUSD, EURUSD and even USDCAD… but USDCHF could find that a little tough to absorb. Well, it’s possible but it would need a minimum reaction.

So as we start the week an element of observation is going to be required to see which of the two scenarios develops. In terms of the overall larger structural implications either is acceptable but whichever occurs it should lead to eventual Dollar losses before too long.

USDJPY and EURJPY both failed on the upside and thus appear to implicate the downside. However, neither has stated its case particularly well. In regards to USDJPY I am basically reluctant to follow what appears to be the general outlook of further robust gains. However, I am struggling in my mind how to fit these both into my preferred bearish outlook into the end of the year in terms of the next 2-3 months.

After the Dollar has completed its decline against the Europeans over the coming 2 weeks or so I do expect a pullback – only a correction but one of indeterminate degree. It could be shallow or maybe moderately deep for the position it’s in. That could cloud the outlook for the JPY pairs. So for now I’ll take these step by step…

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

Have a profitable week
Ian Copsey


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