Wednesday, April 6, 2011

Slow motion indeed… except for the JPY pairs…

Dull, dull, dull… but does seem to limit the Dollar downside for the moment. Don’t get me wrong, it can still edge lower over today and maybe tomorrow but it’s tough to see the Dollar extending losses against the Europeans too far at this point. If there is any exception then it’s probably GBPUSD which actually did perform a lot more strongly and does still look quite perky. From the three Europeans it probably remains the one that can outperform.

As for the other two I think we’re going to see a rough replication of yesterday’s indecision. As I mentioned, I suspect that will eventually mean a weaker Dollar but I wouldn’t be at all surprised if the first move is a higher Dollar before the reversal back lower into late today or tomorrow. That would probably suit GBPUSD also, but in its own way. Probably it’ll be best to stay clear of EURUSD and USDCHF and concentrate on GBP – best buying on dips.

Now… USDJPY and EURJPY… just won’t lie down and die… I’ve held a long term (through to the turn of the year) bearish stance and while I can absorb this rally into such a structure the nature of the strength in both has a certain duality which does concern… EURJPY does appear to hold a potential medium term bullish structure and one that threatens the USDJPY bearish cycles. Could it have found its long term low already? To be honest, just from the cycle perspective we are now 9-12 months from that (ideal) multi-year cycle low and given the variance around cycle lows, well, it is possible. I just can’t reconcile the structure.

However, the rally has been just a bit too direct to feel comfortable as it is generating the need for some excessive (but not necessarily) projection ratios which don’t often occur. The alternative is that USDJPY could just be seeing a running correction higher but right now the momentum picture is still stretching any bearish divergences that develop and each time they break we see acceleration higher. Clearly it’s still in a trend and at this point we can only observe when this trend breaks down but during this try and identify the higher risk areas for termination. It’s a bit of a cat & mouse game that carries risk of trying to anticipate a top too early so be cautious at all times…

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

Good luck.
Ian Copsey


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