Wednesday, November 30, 2011

Teetering on the edge

Have you ever been looking to cross the road, look left – no cars, look right – no cars, look left again and there’s a car coming, look right again and there’s a car coming that side too? The market feels a bit like that right now.

The larger Dollar bullish picture remains intact. However, with the current structures only GBPUSD could possibly reach its target. The Euro seems to have been caught a step too short. USDCHF has a few alternatives and is not really in the same situation though still with finely balanced intermediate bullish/bearish options. Metals have been rather directionless recently and in particular silver has seen a dead cat bounce. However, they’re both in that in-between stage within an overall bearish structure. The losses seen in the Dollar have pushed U.S. indices higher to break the last minor swing high and suggesting a potential reversal.

This last correlation is the interesting one. I am still bullish U.S. equities and have been calling the decline recently in a deep correction. I do see these moving to new highs but once the top is seen it does suggest a much larger decline. I mean a really, really deep correction lower… Therefore, on a broad basis, there is a correlation there. All that’s in question, to me at least, is whether the Dollar extends its gains directly and reverses for a deep pullback or whether it has an intermediate bearish correction. The trouble is that there’s little room in U.S. Indices to see much more of a decline…

This tends to push the bias in favor of the direct Dollar correction lower… This week, and maybe even today, is therefore critical for the next month or so. Given we’re moving into silly season where FX liquidity tends to disappear into black holes, the uncertain political and financial backdrop, there is a risk that the market takes the safe option and returns into neutral mode.

Today, be aware of what constitutes breaks in either direction.

Good luck
Ian Copsey


Tuesday, November 29, 2011

Either the Dollar continues its rally or we’ll see a big consolidation

My Dollar supports held until Europe came in … and then they broke. It wasn’t what I wanted to see but those supports certainly provided the break levels well. So the analysis this morning was tough. Yes, I had to go back over the structures to work out what could be happening but the problem that then raised its head was how all the Europeans correlate with each other.

Problem number one was the fact that EURUSD has not broken the 1.3145 low. That would imply a potential consolidation if it goes much higher. Problem number two was that a consolidation doesn’t look appropriate due to the structure of the bounce from 1.3145… Problem number three is that, while not totally impossible the other alternative would be for the Dollar to be weak enough to rally above 1.5143… (I laughed when I thought of that one too…)

So what are the clues? While not perfect, GBPUSD is actually still on target in its decline. A small adjustment was necessary but it looks solid. At the same time USDCHF is poised between two scenarios – extending higher for one last push or… it goes back down to 0.8567. As far as I can see both indicate continued Dollar weakness but just one last bash before a deeper correction/reversal.

Reworking through EURUSD I can generate a bearish structure here also but I’m not quite so confident that it’ll reach the perfect target but if it continues to decline directly then it could get reasonable close and certainly good enough considering the fact we’re talking about a weekly target.

I also note that the U.S. indices are very close to breaking their downtrend and the correction there. There is one last chance that we could see marginal new Dollar lows in this correction but while these aren’t too deep the upside should resume… and must do so quickly to maintain the current Dollar rally…

Good luck
Ian Copsey


Monday, November 28, 2011

I can’t see that we’ve seen the end of the Dollar upside

The Dollar continued to make solid gains on Friday and in a manner that still seems to suggest further gains to come. I had prepared the analysis just before open and thought there was room for another push higher before a correction. The gap lower on open was somewhat of a surprise therefore and needs a little more care. In most currency pairs it has occurred at a point where corrections can be shallow or deep. The exception, to a certain extent, was EURUSD which does raise a degree of risk that Friday’s low was not quite what I had thought. However, it is in a type of twilight zone where unusually deep corrections can occur but always cause some uncertainties.

It does therefore impose some risk over the situation which will require monitoring of levels across the Europeans in particular to determine whether this gap lower is telling us something more, or is just a deep pullback. My preference is for the latter. For the Dollar to stall at this point would leave it in no-man’s land, difficult to incorporate into a Dollar bearish scenario including one which implies a deeper correction.

I’m therefore still inclined to look for the Dollar to resume its uptrend though would prefer to make sure that we don’t see any further significant losses. Assuming I’m right then we should see another push higher but not to significant new highs to satisfy the targets that seemed to correlate across the board.

A couple of other notes: USDJPY still has one last rally to go before that resumes its losses. AUDUSD may well have found a low but with the Dollar still expected to be firm the Aussie may find the initial gains tough to hold on to. Likewise, EURJPY needs a pullback higher but does still look on an overall downward path.

Have a profitable week
Ian Copsey


Friday, November 25, 2011

European revulsion spurs the Dollar…

My call for continued consolidation on Wednesday was obviously wayward with the market extending its rejection of the European situation with more immediacy. Clearly the two currencies hit most were EURUSD and GBPUSD that left the Swiss Franc looking down on them with scorn. It does rather make a total farce of Clause Trichet’s comments some 4 years or so ago in which he declared that global recession was a thing of the past. No wonder I prefer to focus on technicals…

Of course there is further to go but I’m not in the camp that calls for direct losses down to the 1.1879 low… yet… That event will take a little longer though I do see it happening next year along following the overall Dollar cycle low. Having said that, the rally in the Dollar Index appears to staved off the low I had been looking for soon and from the Index point of view it implies the cycle low was actually seen in March 2008… All that’s left, it seems, is to confirm a major cycle low in USDJPY and we’ll have a unanimous decision… When will that happen? Well, it’s not impossible that we have seen the final low as it reached its bare minimum target at 76.57 (well, 10 points away.) There could still be downside risk here and potentially driven by EURJPY.

Talking of the European situation – more EURUSD and GBPUSD – I still maintain we are in a major multi-month consolidation that is not yet complete. We are in the penultimate leg now that has some little way to go before we get a modest pullback – from a daily perspective. If USDJPY is to make further losses as I suspect then this is when it will probably occur to match with the European recovery. We could be talking some time around the end of quarter one next year.

For now we have to be more vigilant in looking for the current European trend to continue.

Have a great weekend
Ian Copsey


Wednesday, November 23, 2011

More of the same… kinda…

With tomorrow being Thanksgiving the next report will be on Friday

The expectation of consolidation proved correct yesterday. There appeared little interest from the market to push the boat in either direction and to be honest I can’t see there being any change today, amplified by the fact that tomorrow is Thanksgiving and the potential for some to take long weekends.

However, I would just raise one potential risk, not that it takes us out of consolidation but instead widening the range. Yesterday I highlighted the chance for GBPUSD and AUDUSD to make minor new lows. The Aussie couldn’t manage to correct to the area I would expect to generate another leg lower. However, in contrast GBPUSD slightly exceeded its expected pullback and did make target… well, it stalled 2 points short. Now, that target implies a deeper pullback and therefore I feel there may be a mild risk that we could see the overall consolidation range widen, even for EURUSD and USDCHF. Therefore, bear this in mind for the day…

USDJPY rallied as expected but it was always going to be tough to know where it would stall. It did so a little under the last spike high and has turned down. Here we have to take care. It has corrected enough to see the next leg lower but at the same time there’s nothing to stop it extending its correction… Therefore I suggest leaving well alone until range break.

Take it easy today…

Happy Thanksgiving
Ian Copsey


Tuesday, November 22, 2011

It’s not a time to go headlong into the Dollar…

The Dollar bearishness that marked the tail end of last week met a brick wall yesterday with gains seen across the board and more noticeably against the Pound and Aussie Dollar compared to the Euro and Swiss Franc. Taking off the binoculars and looking at the larger picture it does bring more focus on what still appears to be a rather messy near term outlook for the Dollar and what I feel may well be continued sideways consolidation overall. I’m pretty certain that it has taken away any potential for a larger recycling but I’m not sure it’s going to head in either direction with any heartfelt conviction.

One thing to note is that there does still remain a possibility of marginal new lows in both GBPUSD and AUDUSD. Perhaps there may be some friskiness elsewhere, but I can’t see the Dollar managing new highs against the Euro or Swiss Franc. These two in particular look as if they’re hitting a period of modest Dollar weakness but within range. Within this pair, if I see the Dollar weaker it’ll be against the Swiss Franc. USDCHF seems to have some slightly stronger downside risk but probably not until the second half of the day – which is when I see the Dollar being at its most vulnerable.

Elsewhere USDJPY has a quiet day and does still seem to be within a correction higher. I remain bearish overall but this remains in a very large sideways consolidation and I don’t really see and near-term potential for a break out of the 75.57-79.53 range and probably much together than that. Therefore the EURJPY cross will move in line with EURUSD overall and I can’t see that moving too far lower right now and more likely shifting its trading range a notch lower only.

Being what appears to be a consolidating market best take profits when you can.

Good luck
Ian Copsey


Monday, November 21, 2011

Continuation higher or recycling?

The second half of last week witnessed a big tussle between Dollar bulls & bears. On Friday it looked as if the bears had won. However, it has been a scrappy time which caused a lot of head scratching, hair pulling and an eventual headache when trying to tie in wave ratios to individual currency pairs and also structures that seem to correlate across not only the majors but in equities also. I can’t say I’ve come out of the analysis process with clear and definite views with equities drawing me one way and currencies another.

The Dollar strength still appears to provide the underlying influence but we can’t totally rule out what looks as if there could be a deeper pullback and even recycling in EURUSD. In some ways I don’t have a problem with that except in terms of how this will slot in with what I still feel is a predominantly (U.S.) bullish equity market. Not that I don’t feel that equities cannot fall - I think they can – it’s more matching the degree of the moves in each market as the Dollar does appear to have quite firm higher targets.

So there’s a few factors to watch for this week and that even includes the probability that we may only have a 3 day week with Thursday being Thanksgiving which could generate quieter trading.

Of the opposing scenarios I have to say the recycling appears to have the better ratios and if so we should soon see the Dollar ease off through today and tomorrow at least. However, given the ambiguity it’ll probably be best to sit and watch the first part of the day to judge the market’s mood and look for a commitment to one direction.

Have a profitable week
Ian Copsey


Friday, November 18, 2011

What’s the difference between a flag and a banana skin?

One is a continuation pattern and the other is a pain in the backside…

As far as I can see, that’s what our choice is today… On the one hand we have what could be a case for the Dollar to just keep on going higher while on the other we are seeing a reversal being set up. With Dollar bearish divergences building up we have to be aware of this reversal. What’s more, there’s even a risk of minor follow-through to make the flag look like a winner only for a marginal new Dollar high and reversal. I see that potential specifically in GBPUSD and AUDUSD. It wouldn’t surprise me to see EURUSD and USDCHF to fall for the same gag.

Having said that, there could be several variations of the same slip-ups in terms of how far any corrections can develop so we shall have to maintain concentration and awareness of key support & resistance. I had still been considering the potential for a deep recycling but I can’t see that this is implied across the board. Again, it’s something to consider but at the moment the idea of EURUSD moving back to 1.3806 doesn’t seem compatible with USDCHF. However, a modestly deep pullback could be possible though the underlying direction does look predominantly Dollar bullish, a factor we should not forget.

I would add one more clue – and that’s EURJPY. I have been looking for a slightly deeper pullback but it’s been struggling and the next projection is not excessively lower so the potential for a “not so excessive” lower low in the cross and pullback in EURUSD is definitely possible, especially when USDJPY remains in a coma.

So for today, look out for bananas… they’re not very ap-peel-ing…

Have a great weekend
Ian Copsey


Thursday, November 17, 2011

Looks like the market has a bit between its teeth…

Yesterday provided several opportunities for the market to choose to double check, perhaps ease back on the gas, take a small breather, take a pit stop or allow for a deeper correction but each time the Dollar buyers came along and kept banging on those resistance levels until they, without too much effort, they just fell away. I had the same feeling this morning – perhaps we could just see a pullback now with Dollar bearish divergences beginning to develop – but no the market has stripped the poor daisy of all its petals and the collective decision appears to have been made.

There are still some possible banana skins to be avoided although, at this point, they seem more to be fairly temporary setbacks rather than any larger reversal. The biggest problem I had this morning was matching them up across the affected currency pairs in areas that would be correlated with respective structures. The second biggest problem was just the sheer noise of the moves that tend to make identification of major wave endings rather tough to identify. Thus, there’s still reason to be cautious, but for the moment the main risk is Dollar bullish and that’s something we shouldn’t really fight.

Perhaps the exception is USDJPY but since it’s moving in a semi-coma, broken only by short periods where it wakes after a nightmare and decides to have a panic attack, it’s one pair that seems pretty much unaffected by the developments in Europe. I still feel this has further losses to come, not as bearish as I once felt, but do note that it has met its minimum final projection in the decline from 277 in 1982 (only 10 points variance), is right on the month where a “perfect” cycle low is due so we should be aware that at some point it too is going to wake up and begin a very strong recovery.

Good luck
Ian Copsey


Wednesday, November 16, 2011

Resistance creaking… but not quite broken…

Somehow, while GBPUSD broke support and USDCHF extended higher the Dollar Index somehow managed not to penetrate last week’s high. Technically it can still be counted as being in a bearish structure. Can it continue? Well, possibly but it will take some losses to get this back on track. Currently there are even some indications of Dollar bearish divergences in the hourly charts. That’s fine but they’ll need price to actually confirm those divergences – so again, any potential for the overall downtrend to remain intact is going to require some constructive losses soon else key resistances are going to crack…

Whichever way this goes I see quite a solid move through to the end of the year, and if history often repeats itself, then into the early part of January. Up? Down? I don’t really mind. However, I do see next year as a very positive one for the Dollar but that’s another story for another day… or 5 years.

Today… well, it looks like we shall get a pullback first. This, I suspect, will be the litmus test for what is to come – a correction or a total reversal – although the latter will obviously require someone in Europe to say or do something positive which does seem a very remote possibility to be honest.

Thus, take note of the areas that will generate the required break… and be aware that once the break occurs the subsequent move, in the medium term, should be pretty much one way…

Good luck
Ian Copsey


Tuesday, November 15, 2011

Pulling petals off Miss Daisy

It feels like that sometimes… The Dollar goes up… the Dollar goes down… the Dollar goes up… the Dollar goes down… That would be fine if we knew how many petals were left over from all the currency pairs. There’s even the complication that quite possibly some currency pairs have seen their Dollar lows, but not all…

So here we are, back in that “in-between” moment peering over the cliff edge on one side and relative security the other. The cliff edge is slowly crumbling so that some daisies are now in mid air, some are perilously close to the edge but some with the potential to scramble further away from the edge only to be caught in the not-so-distant future…

What can be done? Well, first of all, keep your eye on the cliff edge. The very best break level I can see that could engulf all currencies is at – or marginally above – last week’s high in the Dollar Index.

Otherwise there still remains some chance that we could see some Dollar losses and the main drivers I see are EURUSD, AUDUSD, USDJPY and to a lesser extent USDCHF and GBPUSD. I can’t see any significant drop in either now. I have held that view in USDCHF for a while but yesterday’s drop in GBPUSD just doesn’t look good. This is the one that’s in danger of the crumbling cliff edge and desperately needs to see some strong, strong gains to clamber away to safety. It’s not impossible but boy, it’s making really hard work of it.

As mentioned, the Dollar Index also key as it really doesn’t have any (or not much) upside available before it becomes engulfed. Ideally this really needs to start pushing lower to re-approach the old 74.72 low and below.

For today, it’s another day to be flexible and be prepared to move with the flow. At this point, with a high level of ambiguity, it’s not really worth holding too fixed a view but more to be aware of the options and what evidence is required to narrow down those options to be able to take advantage of the next larger move.

Good luck
Ian Copsey


Monday, November 14, 2011

Swings? May be not … roller coaster more like…

And…. the minor new Dollar highs were the winners… However, they didn’t last for long…

The solid reversal is encouraging for my Dollar bearish preference though clearly we’re still in the early stages of building a foundation for additional losses. During that process there’s still plenty of room for some deep pullbacks and I even fancy a new Dollar high in USDCHF before that finally turns.

The other factors that have contributed to the overall Dollar bearish view are the holding of the key resistance in the Dollar Index and the continued ability for U.S. equities to refuse to yield to the downside. I’d even point out precious metals that have obviously benefited from the recent market insecurity but are towards the end of a bullish correction. That silver has lagged so far behind does imply quite a bearish subsequent reaction.

So what does that bode for us today? Well, the first part of the day should see follow-through on the gap lower in the Dollar. I can’t see it getting too far at this stage and a correction due. Beyond that are some mixed signals – overall Dollar bearish but there appears to be a slight disconnect between the currencies in terms of their position within the Dollar bearish structure. Therefore, don’t be too surprised if there is a period of general consolidation, some pairs extending losses and then correcting while others consolidate. Once this is over we should see losses resume for the rest of the week.

Underlying message: Take care today but don’t get bearish too quickly – unless the Dollar breaks key supports…

Have a profitable week
Ian Copsey


Thursday, November 10, 2011

Swings, roundabouts and seesaws…

With tomorrow being Veteran's Day holiday in the States the next report will be on Monday

The fresh green shoots of spring were quickly destroyed with a sharp frost and the swing between bullish and bearish continues. Indeed, it has taken on a potentially distinctly nasty structure with momentum looking quite firm for the Dollar. However, has it confirmed the Dollar upside? Not yet… certainly not enough to be able to hang your hat on it.

Perhaps curiously it is EURJPY that really grabbed my attention having swooped back down to just above the 104.74 corrective low. What’s more, just in any absorbing tale, it doesn’t look like breaking that low which would really lay on the bearish pressure for a drop below 100. Of course it could be USDJPY that thrusts the final killer blow but it hasn’t really shown that ruthless streak… Of course that implies EURUSD as the more likely aggressor.

Looking at GBPUSD and EURUSD – which both have these very clear opposing structural alternatives – momentum looks exceedingly weak and both seem to be salivating wildly with the opportunity of extending the losses seen yesterday. I have to admit that it does look inviting but it would be useful just to keep in mind the last gasp supports.

Today, while there are risks of minor new Dollar highs there is also suggestion that we need a pullback. Just where those stall will be crucial and could end this bickering between bulls & bears. I have stated my preference for a weaker Dollar but I’d extremely open to either side right now. Both suit my longer term (several year) view that we’re going to see a very strong Dollar.

Have a great long weekend
Ian Copsey


Wednesday, November 9, 2011

Some signs of life…

We may be getting somewhere... maybe… It’s still a bit early to open the windows and shout out loud but a small whisper could be acceptable more for the mere fact we should be aware that yesterday’s Dollar losses do seem to have identified a small weakness in the Dollar bull’s armor.

For a start, USDCHF topped out perfectly at 0.9061-67, hit its initial target and is not that far away from the secondary target. Even USDJPY was rudely woken from hibernation to be pushed out of bed and down below support. GBPUSD did remarkably well despite its ragged, jagged and haggard performance so far this week…

Yet, in spite of these promises of an early spring neither EURUSD and AUDUSD could summon enough strength to break away from their tight range trading and the rugged structures that have developed. I can see potential for the Dollar downside to continue but from what I can see these two must take advantage of that small crack in the window soon else … err… it won’t…

So what if it they don’t? Well, I don’t think it’ll be the end of the world. I was looking at the medium term structures yesterday afternoon and I could still accept a new marginal Dollar high before the downtrend resumes. However, the picture I saw was more convincing for the Dollar bears whether it be direct or after a blip higher. There were too many correlations across markets – in particular equities and gold – that still point to Dollar losses into the turn of the year. Indeed, both equities and gold also held potential for another dip/rally respectively (to correlate with a potential spike higher in the Dollar) before all reverse.

So, to summarize, be aware of the Dollar extending losses but don’t forget the potential for a final twist in the tale and marginal new Dollar highs before the downtrend resumes…

Good luck
Ian Copsey


Tuesday, November 8, 2011

Busy going nowhere…

The market spurned the chance to take more decisive action to allow the Dollar to subside into messy range trading. Indeed the structure it took overall provides it with the excuse to do very little at all again today – or for part of the day at least. This is a picture that seems to be valid just about across the board. Heaven help us if this is a show of solidarity with USDJPY to allow the all currency pairs to remain in 25-30 point ranges for the day…

It does therefore look like today will be a repeat of yesterday, though probably more Dollar downside risk than upside. At some point it’s obviously going to break and even if the Dollar has set up a structure that is totally ambiguous the break can occur very quickly. With the background being as it is the sharper move would probably be Dollar bullish as its hard to see the market shedding its fears at this point, and it’s fear that will drive price more aggressively.

Therefore it’s difficult to provide any stronger and robust view until the current status quo is broken. From my point of view the Dollar downside still appears to be the more convincing when taking equity markets into consideration and that is my favored outcome but at this moment it’s hard to argue the case or feel 100% confident.

Thus, for today we should be prepared for a day similar to yesterday but at the same time being aware of key breaks that will provoke a more directional move…

Good luck
Ian Copsey


Monday, November 7, 2011

Is this the beginning of the end?

The market just didn’t have enough confidence to extend Dollar losses aggressively, concocting a rather complex structure that had some ambiguity in it and perhaps suggesting a subconscious back door route to extricate itself from being bearish. The Dollar gapped lower on open for the most part this morning and this is adding to the weight of argument in favor of Dollar losses. This remains my preferred outlook although I should re-iterate the delicate high-wire balancing act the Dollar is performing right now. Whatever the Dollar decides to do through to the end of the year, the outlook for next year is a much, much stronger Dollar.

For now I feel the stronger argument is still Dollar bearish into the New Year and that being the case it will need to demonstrate this today – at latest tomorrow – by extending losses in a constructive manner. If there are to be any currency pairs that take more benefit from this then I’d go with GBPUSD and AUDUSD which, in this position, both need to make substantial new highs. By contrast I feel that EURUSD and USDCHF will probably demonstrate weaker momentum. For GBPUSD a break above its 1.6166 high would be very beneficial and should then make constructive progress towards the 1.6618 high.

So for today, watch the short term projections to get a sense of whether the Dollar weakness is developing in line with expectations. Confirmation will provide a much stronger base for attacking pullbacks for potential selling opportunities.

Any break back above last week’s highs would be a bit of a dampener although there are deeper corrective resistance levels. However, it will run the risk of the alternate structure of Dollar gains within the larger daily consolidation into the end of the year – but still end with strength next year…

Have a profitable week
Ian Copsey


Friday, November 4, 2011

Not quite out of the woods yet… but close…

If you go down to the woods today… you’ll still see the bears but may also be able to hear the bulls in the adjacent field snorting and not that far away…

There is still a sense of a delicate balance between the two opposing daily structures but yesterday’s developments certainly saw a sense of waning fear and a more nervous calmness begin to pervade the markets. Still, the short term structures seen since the Dollar highs have not been sufficient to totally rule out removing twitchy fingers hovering above the ”HELL, I’VE GOT TO BUY QUICK!” button, but I do see a greater potential now for Dollar losses to resume. One pair I have been watching closely has been USDCHF that I felt had completed its pullback at 0.8960 which implied the next move must be back down below the 0.8567 low… The fact that EURUSD and GBPUSD stabilized does seem to be a positive factor.

Still, there’s a way to go to confirm those latter two but the structures from yesterday’s lows in both have been constructive. It’s now a matter of the rest of the structure working its way through in a similar positive manner. We could find that today, while extending that positive structure may still not quite break the potential bearishness but as long as it’s made further ground I’ll feel a little more comfortable with the Dollar bearish outcome.

Until then we still have to be on our guard. Other than USDCHF there is still room for another bout of Dollar buying without breaking the larger Dollar bearish structure and if anything that is the factor that should warn us to retain that eye looking back over our shoulders so that we don’t get caught out. All being well, though, the weekend could calm the nerves more and see the Dollar extend its losses – and with some acceleration next week…

Have a great weekend
Ian Copsey


Thursday, November 3, 2011

A delicate status quo…

No beams of light shining yet but there may be a slight opening in the clouds allowing slim sliver of silver slipping through. However, it’s much too early to start making claims of a reversal lower in the Dollar. If this reversal is to happen there seems to be limited room in the Dollar Index, but it wouldn’t surprise me to see marginal new highs first. In fact, I’d actually feel a little more comfortable if this final push higher did occur. In GBPUSD and EURUSD there is even a potential risk of sideways consolidation – although this doesn’t appear to be an option in USDCHF which probably heightens the potential for those new Dollar highs elsewhere…

Right now the market appears to be playing a waiting game, the structures developing providing several avenues that could be followed, both bullish and bearish in the near term, without committing to a more sustained directional move. With the fundamental background being what it is, that seems to be pretty obvious. It does, however, raise the risk of some messy, choppy trading ranges and thus the need to be rather cautious with positions today.

My preference remains for the Dollar to come out of this weaker. However, I’d not fight a stronger Dollar since as I mentioned yesterday there are still two very clear alternative structures that could develop through to the New Year. Beyond, through 2012 I still see the Dollar a very clear winner and with what should be a solid uptrend emerging over the early months.

Still, today we have to face the potential complexities, corrections that cloud collective considerations and cautiously cope with care…

Good luck
Ian Copsey


Wednesday, November 2, 2011

Signs that the worst may be over?

The Dollar made some further solid gains yesterday and is certainly stretching the upside boundaries that provide that hazy, misty cloud that separates the beam of bright white light that leads to the heavens and a return to heavy mortality.

Can the Dollar still make new highs? Yes… and still not enter the white light? Just about… I feel that should be seen as a minimum. Momentum hasn’t really taken too much of a breather nor provided any definitive signal of a potential reversal at this point. Therefore we should still be very attentive to how things now develop. I do have two strong alternatives for how the final stages of a base for the Dollar to form a multi year low and I am quite happy to follow either.

I have a slight preference for the Dollar to weaken first but this scenario is going to need a solid and quite direct follow-through soon to be able to retain the sort of targets I have in mind – both in terms of price extent and time. The time frame appears to be around the turn of the year and is one that has a history of seeing major price reversals. Thus we have just 8-9 weeks to see the Dollar losses move above 1.5143 EURUSD, above 1.7042 GBPUSD (and probably closer to 1.80) and down to a minimum of 69.00 USDJPY…

If that scenario fails then the Dollar will rally within the larger weekly consolidation, possibly in the same time frame before a temporary pullback before stronger gains are seen next year.

So watch carefully today. I can’t see much room left on the Dollar upside that would absorb any further strength in one or two currency pairs without tipping the scales. Keep an eye over your shoulder for that bright white beam of light…

Good luck
Ian Copsey


Tuesday, November 1, 2011

Cats & pigeons, mice & women… chaos…

Yesterday certainly threw a spanner in the works… Just about all the structures I have been looking at were tossed casually in a big black cauldron and thoroughly stirred, mixed and pummeled until all resemblance to their prior identity had been stripped away.

Probably the only thing I got right was the low in USDJPY… that it decided to seek succor from the heavens was not an alternative I had considered. Let’s start there. Does yesterday’s 500 point rally mean it is has met its 16.5 year cycle low? Well, I wouldn’t rule it out – it’s certainly in the overall window for a cycle low - but it’s not confirmed yet… A move above (around) 81.00-50 is going to be needed for that. However, I would now prefer it to reach the 80.23 corrective high before dropping to retain a stronger bearish structure….

Ironically, just as I had been considering a slightly weaker route for GBPUSD compared to EURUSD the roles switched. The latter collapsed and the former actually reached marginal new highs. It has pushed me towards a scenario calling for Dollar gains but probably unevenly across the pairs that heightens the potential for more choppy & erratic moves rather than the directional move seen yesterday. That should help momentum generate divergences.

For confirmation I took a quick look at the Dollar Index also just to check how things are there. There’s an argument for us to be pretty close to a normal retracement but there’s an equally valid one a little higher also and of the two I’d suspect the higher. However, from this point onwards I doubt we’ll see such direct moves but more a more choppy extension and that’s probably reflected in the individual currency pairs. The more medium term outlook is still bearish for now.

So today is going to be tough to be exact on support/resistance levels but I’ll try and identify the sort of areas that should see the Dollar top out for another round of losses…

Good luck
Ian Copsey