Monday, September 26, 2011

Is the correction coming earlier than I had thought?

What a dull day Friday turned out to be, the Dollar stubbornly refusing to extend its gains but instead remaining in a range. It has left me in middle ground with upside projections not reached but the correction from its highs being such that it’s difficult to envisage direct follow-through higher. In essence it has left me in the middle of the proverbial rock and hard place. Well, more accurately, any further losses in the Dollar would result in a deeper correction.

It seems that all currencies are in the same boat which has me quite perplexed and therefore I’m taking a step back to observe and look for evidence of any push in one direction that would solve the puzzle. As far as I can still see we are in a larger push higher in the Dollar but not one that is going to break key highs to trigger frenetic selling at this moment. Therefore the puzzle is more one of how this structure develops – whether we see modest gains and then a pullback – or a stronger pullback before further gains…

If there is any single European pair that may highlight the way I think it’s GBPUSD which has approached the 1.5501 high very closely and should therefore represent a key break level. Even then I can’t see the Pound rallying too far.

I should also cover USDJPY that has been developing quite well in its overall downtrend. I certainly wouldn’t want this to break above Friday’s high else this would put more weight on a deeper correction higher. That also represents the situation in EURJPY also. I still prefer the downside as always but it really does need to extend losses now else we’ll see a much deeper correction. That would bug me from the cross point of view also. That needs to push lower now else see a much deeper correction.

So while not decisive comments today I feel they do represent the balanced risks… Hopefully by tomorrow we’ll have a stronger picture.

Have a profitable week
Ian Copsey


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