Wednesday, July 6, 2011

The Dollar looks set to remain firm… but caution is required

I have to say that much of yesterday developed quite close to expectation. Both EURUSD and GBPUSD went down as suggested and these should remain on the bearish side. However, there is a question mark over GBPUSD since although the decline was expected, the deep pullback higher has put the cat amongst the pigeons… To complicate things further USDCHF failed to remain above support and actually crashed much lower which, on the face of things, actually looks a lot more bearish…

For the moment I shall treat USDCHF separately as it does seem to have become more of a favored currency compared to the other two. At the same time I’ll retain a bearish stance in EURUSD and GBPUSD. The former has certainly worked extremely well and I’ll stick with the structure I am following. I do have more concerns about GBPUSD but at the very least it does seem to need one more new low below the 1.5911. That just leaves USDCHF for which I feel we need to work with breaks but the downside here looks favored too.

USDJPY… rallied but stalled just below the 81.26 high. I’d like to say it’ll continue going up. However, even if it does I feel the risk is that it’ll manage only a small breach and then head back lower and then we’ll have to see how far it goes. The controller there may well be EURJPY which also dipped as expected and on the back of the Euro. At the moment the stronger structure here is bullish so I’m cautiously expecting this decline to be corrective. As long as it remains above support I’ll be looking for stronger gains here and this may well coincide more with what could be the end of a triangle and a subsequent break higher. This is still just an outlook but seems to correlate well. At the very least I feel the targeted supports in EURUSD and the cross should provide key support which will dictate the next larger move.

The Aussie still needs to extend losses a little more but I’m still anticipating a subsequent push higher. USDCAD needs to extend losses now or trigger a sharper recovery. Even if losses are seen these should turn into a correction higher anyway…

Good luck
Ian Copsey

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