Friday, October 21, 2011

We should be back to a weaker Dollar again…

The caution shown yesterday appears to have been well placed. I’ve ended up with two broad possibilities: either we see direct resumption of losses or at worst plain continuation of the consolidation. I’m more biased towards the former mainly because GBPUSD appears to have provided greater potential for it to resume its own rally though I can’t 100% rule out a sideways move here also. A break below this week’s Dollar lows would add to the direct loss scenario but even then there are further support levels that need to be breached to signal direct follow-through. I’ll detail those break levels in each section.

What does concern slightly is EURJPY but not really for today. It seems to have settled down somewhat and I tend to favor this moving higher so it does seem to work with a Euro bullish move. However, I don’t want to get too excited about how far this will rally and feel that a larger correction lower will be due before long. Now, whether this comes through EURUSD or USDJPY is a different matter… but maybe one that does need to be addressed early next week.

USDJPY did recover yesterday but not really far enough to make a case for a confirmed move in either direction. With its current propensity to remain in exceptional tight ranges we could be forgiven for ignoring its presence. However, it does look like setting itself up for another modest follow-through that could still come in either direction… It’s one of which to be aware but best left to its own devices for the time being…

Thus, as we approach the weekend, favor the Dollar downside but also with the awareness of what levels actually imply follow-through as when the Dollar does lose out I feel it has some way to go…

Have a great weekend
Ian Copsey


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