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


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