Friday, May 20, 2011

A mixed bag of tricks…

I have to admit that I’m glad to see the week ending. It hasn’t been a great one for the analysis. Corrections are always the more challenging structures to navigate and this particular corrective wave (from the Dollar lows), at least against the Europeans and a question mark over USDJPY, is one of the most notorious for complexity. The double edged sword for some of the currencies is the uncertainty over the depth of the pullback. EURUSD and to an extent USDCHF do have general guidelines so there are at least restricted limitations. However, this still allows retracements of between 14.6% and 58.6%... so we have quite a band to play with.

Have we done enough to satisfy the minimum? In fact the answer is “yes…” Do I think we’ve completed the pullback? I can’t see too much corroborating evidence… But I wouldn’t say “definitely not.”

Indeed, for the moment I’m sticking with my view that the Dollar should resume gains. However, the break levels that would raise the stakes that the European lows are in place are very close. There are also some rather conflicting signals developing too which have raised my concern along with the strain being put on structural relationships. In particular yesterday’s strength in GBPUSD does raise the potential for it to have completed a full correction from the 1.6745 high. It is just a “potential” at this stage as there is an alternative interpretation which would suggest we are just seeing a recycling higher within a more complex intermediate bearish correction…

Thus, having had a bad week (well, some parts were good – USDJPY has provided some good calls over the past two days and while EURUSD went a bit haywire yesterday the move higher was caught quite well – I feel more in the mood to look for moves to confirm structure before hanging my hat on one view.

Therefore, maintain focus on the structure that should occur – and be aware of a divergence from that to judge the final outcome.

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

Have a great weekend
Ian Copsey


No comments:

Post a Comment