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


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