Monday, July 25, 2011

We still seem to be in mid-correction but Dollar losses should continue…

The week ended on a rather dull note although that wasn’t really too surprising. Corrections developed and, as has been the pattern of late, the market subsided into a rather slow moving and dull correction. The open this morning brought a flurry of activity but without really generating and substantial change in the overall picture. The correction still appears to be in place but should complete over today, possibly even by as early as the European day and should allow the general Dollar weakness to resume.

Even then I can’t see the losses being excessive or possibly even uniform across currency pairs and certainly the route to the final lows could be quite choppy. The structures are not coming to the choppy segments that should provoke the formation of Dollar bullish divergences over the coming 2-3 days so by the end of week the losses will begin to be pared back.

I do have a few concerns, the main one being AUDUSD which has basically arrived at the area which I thought should generate a reversal. This probably requires a little care itself.

One other area that hasn’t gone wrong yet, and actually performed quite well, is EURJPY. It’s going to be a good one to watch and I suspect will still extend the recent gains but is approaching the end of a corrective structure and also key resistances. Once achieved it will imply resumption of losses and I suspect it will be the reversal lower in EURUSD that will cause the damage. There is still downside in USDJPY that should match the upside in EURUSD but a pullback due. Thus, as far as I can judge it does imply quite forceful losses in EURUSD when this develops. Possibly at a later date USDJPY may well follow-through also but that’s an event to wait for rather than anticipate its development too prematurely…

Thus, start the week with some caution but look for Dollar losses to continue overall… (perhaps with the exception of USDCHF…)

Have a profitable week
Ian Copsey

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