Tuesday, October 25, 2011

A bit of a pullback first but Dollar losses continue…

There were a few options open yesterday, the final developments providing more information though in some currencies the larger structure still has one or two ambiguities. However, overall the additional Dollar losses were constructive and we should see more developing.

The initial risk today does seem much like yesterday with the Dollar expected to generate a correction higher and possibly modestly deep – back to yesterday’s corrective highs potentially – before the next larger leg lower develops. Momentum still has a nice curving decline that should provide resistance to allow the decline to extend to new lows by tomorrow although in many currency pairs the next anticipated correction appears very brief so the decline could take on an acceleration lower through to Thursday or even Friday.

All straight Dollar pairs appear to be in accordance with each other, as do the U.S. equity indices that also made new highs yesterday. However, they too are due a pullback so the prospect for the Dollar to recycle higher over the European day should allow the indices to open lower.

EURJPY has been as sensible as expected. By that I mean it was all over the place… which was the expectation… However, I am getting the impression that it should end the consolidation today and my preference is for it to rally higher but not reach the 107.67 high. I still feel this has begun a larger correction lower but needs this additional push higher before it reverses lower.

Thus, today should provide some good Dollar peaks which look good for some pretty directional losses over the rest of the week so be aware of the sort of levels which should cap the Dollar and look for bearish set up entries.

Good luck
Ian Copsey


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