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


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