Thursday, July 21, 2011

Looks like more of the same…

It’s hardly a riveting market is it? Very clearly the market just doesn’t have any appetite to push the limits. Which is the greater threat? The European debt crisis or the U.S. debt crisis? It’s a bit like trying to work out whether suicide is better than getting shot…

From my point of view I can’t see the current round of Dollar weakness getting too much further. It does still have another leg to go but the writing is on the wall warning of a reversal. What’s more, without any break of significant resistance it could still yet generate a fresh new low in the Euro… but if it does I can’t see it will be by too much.

There does seem to be a fairly clear pattern across several currency pairs indicating the final stages of Dollar weakness. These include USDJPY, GBPUSD, AUDUSD and USDCAD. All suggest an imminent reversal but again, we can’t get carried away as they should only be corrections, albeit potentially quite deep. EURUSD is drifting in an almost comatose state being buffeted by the others but possibly has the strongest risk of a stronger reversal but as I mentioned I doubt it will get too far.

That leaves USDCHF which is still a little hazy given Monday’s gap lower that doesn’t even show on the charts… I do feel the general move should be higher and thus does seem to correlate with the general outlook elsewhere and is more of identifying the corrective low.

Which just leaves EURJPY which was as lethargic as the others but has very limited upside at this point.

Thus today the better prospect seems to be identifying the Dollar lows and looking for the reversal higher.

Good luck
Ian Copsey

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