Thursday, September 22, 2011

More Dollar gains – but some caution required

Yesterday was pretty much close to the initial template I described: Asia sat on its hands. Europe waited for North America. Finally, North America saw that neither Asia nor Europe committed to any moves waited for the FOMC. However, the FOMC appear to have provided the parcel to pass.

The Dollar has taken a sharp shove in the back and pushed its way higher again and there seems more to come but I feel the evidence in other currency pairs does imply that some caution is required in expecting excessive gains. We should also note that some Dollar bearish divergences seem to be developing and being towards the ending stages this amplifies the risk of some choppy moves.

Even USDJPY has seen a slightly deeper correction than anticipated but I don’t want to get too bullish at this stage. More, I do see risk of a day or two of consolidation before it does extend losses so it’s probably not the best time to hit USDJPY but EURJPY does look vulnerable as ever. It won’t quite hit 100 at this stage but it’s making its way down there bit by bit…

Also of interest is just how the equity markets will react. There is risk of modest losses but I’m not overly bearish at this stage. The need here is limited losses while the Dollar rallies but stronger gains while the Dollar corrects.

Good luck
Ian Copsey


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