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


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