Wednesday, November 9, 2011

Some signs of life…

We may be getting somewhere... maybe… It’s still a bit early to open the windows and shout out loud but a small whisper could be acceptable more for the mere fact we should be aware that yesterday’s Dollar losses do seem to have identified a small weakness in the Dollar bull’s armor.

For a start, USDCHF topped out perfectly at 0.9061-67, hit its initial target and is not that far away from the secondary target. Even USDJPY was rudely woken from hibernation to be pushed out of bed and down below support. GBPUSD did remarkably well despite its ragged, jagged and haggard performance so far this week…

Yet, in spite of these promises of an early spring neither EURUSD and AUDUSD could summon enough strength to break away from their tight range trading and the rugged structures that have developed. I can see potential for the Dollar downside to continue but from what I can see these two must take advantage of that small crack in the window soon else … err… it won’t…

So what if it they don’t? Well, I don’t think it’ll be the end of the world. I was looking at the medium term structures yesterday afternoon and I could still accept a new marginal Dollar high before the downtrend resumes. However, the picture I saw was more convincing for the Dollar bears whether it be direct or after a blip higher. There were too many correlations across markets – in particular equities and gold – that still point to Dollar losses into the turn of the year. Indeed, both equities and gold also held potential for another dip/rally respectively (to correlate with a potential spike higher in the Dollar) before all reverse.

So, to summarize, be aware of the Dollar extending losses but don’t forget the potential for a final twist in the tale and marginal new Dollar highs before the downtrend resumes…

Good luck
Ian Copsey


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