Friday, September 23, 2011

A larger correction looms

Yesterday proved to be quite a turning point – not so much as a change in direction but more one of the final confirmation of crossing the line between two alternatives. This occurred not only in the Dollar but in equities also. In particular the drop in the U.S. market is making it mighty tough to maintain a bullish structure there. Not that I feel we’ll sail happily into the sunset. There’s still some twists and turns further down the road but as a view over the more distant horizon the outlook the Dollar should be making its final preparations for take off into the 2015-2017 time frame.

So feet, back on earth and still in the departure lounge, we have the near term to navigate. Well, I feel there is modestly deeper correction to come now but there is a slight duality and we’re going to have to watch key Dollar supports early in the day. While they hold we can see another leg higher… If they break then a deeper pullback but I can’t see it being overly strong and should be the penultimate correction in the decline. Thus, don’t get too carried away with the move higher and look for losses to resume once complete.

That leaves poor old USDJPY. While the Dollar rushes heavenwards against just about everything the Yen is soaring against the rest and what’s more, there’s no end in sight there either. Having said that, after another drop the cross is due for a correction… but a correction only… before making an assault on 100 which should break with ease once tested. Indeed, there is risk that we’re going to see the losses in USDJPY I have been waiting for also. Overall, for the JPY crosses the way forward will remain to sell into corrections.

Have a great weekend
Ian Copsey


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