Thursday, June 23, 2011

There are early signs of the Dollar looking to recover… but hang tight…

Yesterday’s drop in GBPUSD may well be a signal to drag the rest of the world into buying Dollars. However, I think jumping in right at this point is probably a little too late. While it has quite bearish implications it should be due a correction before it can make further headway. Keep in mind that this does seem to imply a target in the mid 1.50’s so the downside risk is quite attractive.

There is now a bearish divergence in EURUSD… but will it go down directly? Well, I won’t rule it out but I tend to fancy a push to one more high perhaps… It is resting on key support so it’s a bit touch and go. The reason I wonder about the potential for a push higher in EURUSD (although it could be just a correction) is that USDCHF would make a much nicer structure if it could retest close to the 0.8326 low… even a touch below would be ok. It’s just a matter of whether the moves between USDCHF and EURUSD will be correlated.

Besides, if GBPUSD does correct higher I feel a fairly deep correction may well be appropriate for the subsequent projection lower. Thus, today is a day for acknowledging the potential for resurgent Dollar strength but also waiting for that to be confirmed in case the pullback does develop…

USDJPY … very clearly range bound and has spent the third day in a row between 80.00 and 80.36… This morning has seen a minor break above and we’re close to key resistance so now the question is whether this, too, can take advantage and also push higher…From what I can see there’s a good argument for it…

In turn this can have impact on EURJPY … so be prepared to be nimble here also…

Good luck
Ian Copsey


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