Friday, September 16, 2011

I hate it when I make stupid mistakes…

Arrgghhh… Going back over EURUSD in particular I can’t believe what a silly error I made. Having analyzed that decline again I can see such a better set of linking ratios that made the low very obvious. Given my original 0.8997 retracement target in USDCHF also the peak we saw was well within bounds of variance. Head bowed and humbled but quietly satisfied with the daily picture…

Actually, one of the contributing factors to looking for EURUSD to make a new low was GBPUSD which… I still feel has downside risk. Yes, that recovered too but nowhere near to the extent of EURUSD. It’s more a matter of how GBPUSD can extend to new lows while EURUSD remains above 1.3494. It’s quite possible but let’s take one step at a time.

What does all this mean? Well… recall my comment about the Dollar Index yesterday? It would seem that as long as that analysis is correct we have one more low in the Index and that should translate into Dollar weakness overall. The low in EURUSD was at a convenient level to make a push above 1.5143 – even if briefly – quite possible. I’d like GBPUSD to move to a new high too… equally the U.S. equity indices… but once again… let’s take one step at a time since there is an alternate structure.

First of all I still feel EURUSD and USDCHF have a little more to go in this initial reversal. EURUSD in particular is approaching suitable levels that would enable a pullback and then follow-through higher that could reach 1.4930 again. However, I will be expecting a pullback so don’t follow-through with this move strongly and more watch for signs of the Dollar’s weakness fading. That should allow a pullback and this is where GBPUSD has to prove its stronger vulnerability.

Equally, the description of EURUSD also fits the situation in EURJPY… and the downside is still the stronger risk in the cross but we should now begin to see USDJPY take over the reins to carry the cross lower.

Have a great weekend
Ian Copsey


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