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


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