Thursday, July 7, 2011

There seems a little more to go on the Dollar downside – but more limited…

There’s some interesting stuff going down at the moment. I am struck more by an apparent convergence of signs in EURUSD, GBPUSD and AUDUSD… possibly EURJPY also… that all appear to be pointing to an end to their declines and the greater risk of a reversal higher. The final reversal signals are not yet in place and should require another push lower. The question here is by how much?

Naturally I tend to prefer the Dollar downside due to my bearish cycles through to year-end. As mentioned before we are already in the larger deviation range around that cycle low so we do have to be alert in case it simply resumes gains but I tend to be against this as the USDJPY low was back in March so just a bit early. However, the sort of decline I’m looking for would appear to need some catalyst and there’s not much around to suggest that right now so some care & attention is still going to be needed in case another holding pattern develops.

What I expect over today is probably more of a slow grind day but seeing those pairs mentioned above edge just a bit lower. The black sheep of those is GBPUSD which does need to make a new low below 1.5911 so this adds just a little more complexity which suggests that any resumption of the upside may well be limited to allow GBPUSD to extend losses into early next week… Well, let’s see, tomorrow is the monthly “let’s panic and cause lots of spikes day” with the non-farm payrolls out in the States.

I sense that even USDCAD will begin to range trade too while USDJPY has been tied up like a dog to a washing pole so it can’t move any further than the length of its leash. In particular USDJPY needs a bigger move with what is likely to be a lot of pent up energy in a coiled spring…

Good luck
Ian Copsey

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