Tuesday, September 6, 2011

Once bitten, twice shy...…

The coil in the Dollar bearish structure has unwound itself. Has it turned bullish? Well, it’s towards the high of the range but is in some ways in exactly the same position on the opposite side. The Dollar is stronger but hasn’t confirmed the upside either.

So what next? To be honest, I think we have to wait. When the break comes I think it will be quite decisive but having been bitten on the bottom… umm… side… I’ll not stick my head above the parapet in case I get my head bitten off too…

There seems to be this big battle between the Dollar bulls/equity bears and the Dollar bears/equity bulls. From the noise I hear the former are a louder group, but have been for some while (and many having been bearish equity since the 2009 low…) We are due a very big reversal higher in the Dollar, I agree, but I’m still not certain that we have quite reached that point.

Right now we are still in the 5-month range seen in EURUSD, a commendable period of stagnation and indecision. Even if the outcome is going to be Dollar bullish I don’t think it will come directly. There should be a pullback higher in EURUSD at the very least and from not far below where we are now. The difference between the bull/bear outcome is that this decline is likely to be the final part of the consolidation in a Dollar bearish scenario and would drive EURUSD higher directly while a Dollar bullish outcome would require a correction only and then decline…

Therefore it still smacks of indecision and confusion which equates to continued whipsaws and bitten bottoms... and tops…

Have a profitable week
Ian Copsey


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