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HARMONIC ELLIOTT WAVE

Friday, December 23, 2011

The year-end should see Dollar gains extend…




It’s going to be difficult to really see much happening today, most likely some early consolidation given that Japan has public holiday and later I suspect a modicum of Dollar gains but without there being any excessive moves. Being the last update for the year I’ll concentrate mostly on the more medium term outlook through to the end of the year and beyond.

Very clearly I remain Dollar bullish, mostly in EURUSD and USDCHF, both of which should see some solid follow-through over next week This will probably rub-off on GBPUSD but I’m not so sure that it’ll make new lows. There is perhaps a mild chance of minors lows but even if there are I can’t see them being excessive. Once this next leg higher for the Dollar is complete it should allow a modest pullback before the next push higher – maybe into the 2nd or 3rd week in January to see a more major high that should generate a much stronger correction into Spring time.

It would appear that even USDJPY has finally succumbed to the upside and may well confirm that we saw the 16.5 year and 33 year cycle low at 75.57. However, it doesn’t look as if it’s going to go mad just yet but overall should make consistent gains now. The impact on the cross? To be honest it looks like the losses in EURUSD are going to outstrip USDJPY as the cross doesn’t look that bullish right now. I have been quite bearish on the cross and I’ll remain bearish but the prospect of a firmer USDJPY will mean more care is needed for the cross.

May I take this opportunity to wish you all a splendid holiday season and a truly happy, healthy, peaceful and of course prosperous 2012

Ian Copsey

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Thursday, December 22, 2011

There seems a good chance we can begin to see Dollar gains again


Yesterday surprised me somewhat. The market seemed to be doing rational things, or at least what I think is rational. Indeed, it reached the retracement areas I had looked for that would complete the correction. I can only now assume that the Dollar will resume its rally.

Assuming this occurs two key areas should be watched away from EURUSD and USDCHF, both of which should see the Dollar extend to new highs. This is where I’d rather see GBPUSD and AUDUSD remain above their recent lows. It wouldn’t be the end of the world if they did, but it can’t be by too much. Having said all that, this is effectively the last trading day before Xmas but even today will be one where traders really, really prefer to sit on their hands and dream of Santa. Thus, it’s quite possible that while we could see some movement the chance of lapsing into consolidation is high.

USDJPY is making full use of the 77.61 – 78.16 range… I can see arguments in both directions. However, retain composure until the final break is made. From the perspective of the cross it looks to me as if it found its retracement resistance – or soon will – and the downside still appears the more vulnerable.

Take care. Only take trades where you see a strong set up… but be aware that in such low liquidity these can fail more often than normal…

Good luck
Ian Copsey

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Wednesday, December 21, 2011

That’s probably the end of any sense before Xmas…


Yesterday epitomizes December for me. It’s actually one of the times in the year when I can just about guarantee that things turn crazy as liquidity drops in the final run into the holiday period. I obviously work extensively with ratios but these require a liquid market through mass psychology. Clearly these break down during the second half of December.

Of all yesterday’s sharp rally in GBPUSD has to be handed the prize. It’s certainly a move that has thrown open the outlook in this particular pair. I remain overall bearish but this rally has really knocked the medium structure for six and could actually still see some solid strength over the coming week or two. I don’t see it as a massive bullish rally but could envisage a longer period of sideways consolidation. However, this is one that needs more due diligence to confirm what it intends to do…

Otherwise EURUSD and USDCHF look more to be in the corrections I had anticipated would follow one last push higher in the Dollar. Very clearly in EURUSD the final dip was much, much shallower than normal. At this point it doesn’t change the overall picture at all. While it has potential to deepen just a little more I still feel the major risk is Dollar bullish.

As for USDJPY… it’s still in that area where it could move either way, hedging its bets, waiting for a more decisive punch to either confirm that the 33-year cycle low is in place or to see one last dip to the 70-73 area before it reverses. At this point it’s erring more to the downside but even if it does we have to wonder how long it will take. With the strong objection to such a move by the MOF it has to be in one of two ways – straight down in blind panic followed by a similar reversal or it can do it the slow way and grind away the pips one by one like a prisoner digging his way out of jail with a teaspoon.

Take even more care these next three days… There are some signs it could prove nasty and completely erratic.

Good luck
Ian Copsey

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Tuesday, December 20, 2011

STILL looking for that extra push higher…


Well, that wasn’t much fun was it? However, all it did was delay the next Dollar leg higher by forming a complex correction so frankly the outlook remains the same. The positive thing is that the correction is extremely unlikely (and I leave a small door open since we are in that weird time of year) that we’ll see the correction become any more complicated. Hence today, Santa Claus willing, we should see the Dollar gains that I have been sitting, twiddling thumbs and waiting for.

Yesterday I made a special mention of EURJPY. I’ll do so again but more from the USDJPY side of the cross. The sudden rush back up to 78.153 (and was that really 78.158 to make a new high?) was an interesting development that appears to raise the bullish scenario again. It has started the day on a firm note and as long as it can break above yesterday’s high I feel the potential for this to become much stronger holds far greater odds in its favor. I’d still wait for that break. After all, it is ‘that time of year’ when snafu’s are common. However, if it does I think it’s worth following.

It would, of course, have a potential impact on the cross although with EURUSD expected to be heading in the opposite direction the cross may well have another day buried in introspection. Otherwise any failure to make the upward break could keep USDJPY in a consolidation to allow the cross to dip to the target areas I indicated yesterday.

Therefore, the summary for today is – watch for Dollar gains but don’t get too carried away as we’re due a longer lasting pullback through to next week at the very least.

Good luck
Ian Copsey

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Monday, December 19, 2011

Still looking for that extra push higher…


Gee, the Dollar became pretty stubborn at the end of last week but perhaps that’s just a factor of the time of year. Guess what? I’m still looking for that additional rally… It’s this next push that should generate a longer lasting pullback that could even last until after Christmas.

That being said, there are some issues that need to be considered, the main one being the depth of the pullback seen in USDCHF which appears to be one step ahead of EURUSD. I had been anticipating these to occur together. However, it may well be that we’re going to see a longer consolidation in USDCHF over this coming week and perhaps in the form of a triangle. Pragmatically, the potential for currency pairs to develop at different stages must be considered given the weirdness that can occur at this time of the year.

The other area that should be highlighted is that of EURJPY which appears to be aligning itself with EURUSD. By this I mean that it, too, seems to require one more dip before a longer lasting correction. Now, that may not seem particularly surprising but the knock on impact is what happens to USDJPY and the answer seems to be very little. I have been sitting very much on the middle line between quite bullish and quite bearish for a while trying to spot the breaks that would upset the equilibrium to push it one way or the other. To be honest I’m still at that point… At this point all I can say is that USDJPY is the wild card that could impact on the cross in a larger way. Right now, the status quo is neutral but it is one to watch…

For today, while there is a mild risk of a minor new Dollar corrective low I still look for it to rally. However, as we move into the week before Xmas so be aware of the whips and weirdness that it brings. I am noticing projection ratios beginning to become more vague, shallower than normal pullbacks and also projections…

Have a profitable week
Ian Copsey

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Friday, December 16, 2011

What should have come yesterday … is likely today…


That was a weird old day… in some respects as I had expected but just took all day to complete the anticipated corrections in EURUSD and GBPUSD while both USDCHF and USDJPY saw stronger drops and EURJPY went nowhere at the speed of the Higgs Boson…

However, it does seem to have provided more meat to the bone and the follow-through in EURUSD and GBPUSD should occur today. Both should then see a more intermediate correction developing before the next extension lower. This does still seem to slot in comfortably in the overall Dollar rally and we’ll just need to handle how it develops around the Xmas break.

The pullback in USDCHF was also quite healthy – not that I expected it – but has generated a more robust structure. It will probably mess about for a couple of days, a recycling higher today but then lower again next week as EURUSD and GBPUSD start their corrections higher. At that point these should all revert back into a correlated move.

USDJPY… hmmm… the dominant sluggish reactions for some while have made this tough to follow (mainly because I keep falling asleep when I look at it…) but I do find yesterday’s losses slightly harder to fit into a bullish structure as I had begun to consider. I’m still a bit wary of this one as it hovers one way and then the other. Bottom line is that even if we see new lows I can’t see them being extensive. I think for today we’ll just have to see whether it extends losses or makes back what it lost yesterday…

As always in December… take care and be aware… The ratios are becoming a little stretched right now which is a common factor in December’s low liquidity markets so take levels as approximate

Have a great weekend
Ian Copsey

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Thursday, December 15, 2011

More still to come…


The Dollar uptrend resumed more directly than anticipated but overall it is on the right track and there’s still more to come. There are some Dollar bearish divergences developing across the board but unless they are confirmed by breaks of key lows there is no reason why the uptrend can’t continue – and possibly then just force the divergences to either break or become more entrenched.

On top of the fact Asia normally doesn’t see too much movement there is a little conflict as we start the day generated by EURJPY that met its target and is due a pullback higher. If EURUSD is to resume losses I’d rather not see too much upside here. However, that will imply that USDJPY has to take the responsibility of taking the cross higher. It’s certainly possible since, although it stalled right at the area where an alternative bearish structure would imply a top I feel there is quite a strong risk for this to push its way higher and back to previous highs. It’s still in slow-motion mode but if this does develop to allow the cross to meet its retracement target it will probably confirm another dip in EURUSD.

Indeed, while the structures are becoming a bit stretched and wonky my overall impression was that we should still see the market extend the Dollar’s gains. Then add the fact that any large trades will probably be executed before the weekend (because of even more rapidly deteriorating liquidity next week) there is every chance of a more extended move today and tomorrow.

Therefore watch what Asia does, in particular USDJPY and the cross as this should provide us with clues…

As always in December… take care and be aware… The ratios are becoming a little stretched right now which is a common factor in December’s low liquidity markets so take levels as approximate

Good luck
Ian Copsey

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Wednesday, December 14, 2011

Dollar gains have clearly resumed…


Yesterday’s break higher in the Dollar appears to be absolute. Just as yesterday’s analysis was lengthy, so too was today’s, having to go back and make sense of the prior structure. This month’s low-liquidity weirdness hasn’t helped but then the entire move lower from 1.4247 EURUSD and 1.6166 GBPUSD also proved rather whippy and containing highly unusual ratios and development. However, that said, the Dollar’s strength must now have further to go… and that does seem to imply gains for the rest of the year…

For now we have either seen, or will soon with marginal new highs, the limit of this part of the move so we should be prepared for a correction today before the next leg higher can develop. Given there’s quite some way to go position takers will benefit from buying into the dips. I am looking for the triangle targets in both EURUSD and GBPUSD to be met in this decline, an event that should then spark a deeper pullback higher in both. The same is true of USDCHF although in a different structure, but still bullish, that once the high is seen a deeper pullback will be expected. Therefore correlation does appear to be present through the Europeans.

EURJPY has also broken lower and that seems to have further to go, equally with a pullback higher due but an eventual move to sub-100 is anticipated. This begs a question over USDJPY. It seems like EURUSD will drive this decline and to achieve the levels I expect may well indicate continued sideways consolidation. If we saw the losses implied within a bearish scenario in USDJPY then the cross would fall through the trapdoor and I’m not sure that’s really implied. Therefore, while I’d prefer to be bullish USDJPY the risk is for some further consolidation.

As a point of interest the U.S. indices didn’t react too much. The same occurred the last time the Euro had a hissy fit and dropped like a stone. That is encouraging as I still have the indices pushing higher still and thus should then benefit once the Dollar corrects lower once these current moves are done with…

As always in December… take care and be aware…

Good luck
Ian Copsey

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Tuesday, December 13, 2011

All mixed up and muddled


Whew… The analysis normally takes around 2 hours… today was 4 hours… Clearly that implies there are a multitude of anomalies between not only the currency pairs but also the implications of yesterday’s breaks on the medium & long-term structures. In EURUSD and USDCHF there are possible recycling possibilities but even that would generate conflict in the longer-term structures. However, that is not an uncommon feature during December trading. What it does mean is that additional care and observation is required from this point forward when effectively we only have around 5-6 more trading days with any meaningful liquidity… and even that can be a stretch of the imagination…

The most obvious anomaly was the refusal for GBPUSD to extend losses below 1.5525 while the other two Europeans saw the Dollar push to new highs taking the Dollar Index very close to its recent high. Until 1.5525 GBPUSD breaks it can still reach 1.6019… although I have to say that is quite a task. However, if yesterday’s Dollar highs in the other two are not broken by any significant amount then a recycling may well develop. Of course the problem will then be working out how this fits into the daily structure…

AUDUSD and EURJPY have moved to the limits of their respective pullbacks and frankly in a manner that doesn’t raise the strongest confidence. For the cross, much will depend on USDJPY which is also tiptoeing along a fine line between bullish & bearish…

All in all, given the confusion raised by yesterday’s moves, I don’t have the greatest confidence in much at all. This tends to point to our need to tiptoe through the resultant debris generated by yesterday’s fracas until stronger confirmations of a return to normality return…

As always in December… take care and be aware…

Good luck
Ian Copsey

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Monday, December 12, 2011

Looks like a dull start to the week


It was all fun on Friday’s roller coaster, the Dollar initially pushing higher only to whip back lower but in a move that couldn’t be sustained. It has brought with it the probability of further consolidation until the market begins to settle on one direction, a decision that it found far too difficult to make during the entirety of last week. However, I do feel it will happen this week and from the moves I have seen I find it hard to be Dollar bullish…

I note that EURJPY appears to have shrugged off the losses it made and as long as it can maintain current levels for a while longer the next move should be higher. That should be reflected in USDJPY or EURUSD … or even both… The Dollar Index still looks bearish to me and it’s more a matter of whether it has seen its corrective high or has one more blip higher to come.

On USDJPY, it remains with a degree of ambiguity. I can repeat the statement about the impending 16.5 and 33 year cycle lows but I’m sure you’re aware of this by now and that we’re in the broad timing window for the Dollar to begin a long recovery. The current ambiguity is just stretching the potential for one more decline. It’s more a matter of “when” and not “if.”

So treat the first half of the day with care given the risk of continued whippy sideways consolidation but be prepared to start looking for a break lower in the Dollar to come either by the second half or just into tomorrow…

As always in December… take care and be aware…

Have a profitable week
Ian Copsey

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Friday, December 9, 2011

We could have taken the week off…


Just as I thought there was potential for the Dollar to resume its losses… that December moment hit yet again… Has it forced a change in the underlying expectation of seeing that weakness? I don’t think so. If you look at the charts for the past week the clear picture is one of confusion and lack of will in pushing the market in either direction a.k.a. a corrective market.

Indeed, broadly the sudden rush higher in the Dollar hit key resistance areas and adds weight to the basic underlying risk of further losses. The question then to be asked is whether the market has any intention to push outside the recent range given that liquidity will be lessening even more rapidly from this point into the end of the year. That factor is actually a double-edged sword. The reduction in liquidity will merely exaggerate moves and increase the reactions to relatively smaller trades and from what I can see this should extend the Dollar’s losses.

The Dollar upside is either complete or we’ll see just one more poke higher but only to marginal new highs but overall the risk does appear to be lower again though the chance of seeing a break of this week’s lows today seems unlikely…

USDJPY… Well, that was a weird move. It has left me just a bit mixed. EURJPY went lower also and could see another dip but the move lower from 105.69 does seem corrective also. Hence I feel this should be on its way higher. Of course it could be driven by EURUSD but if I’m right in what I’m seeing then it will require a double effort from both constituent parts to take this higher. Therefore, I am cautiously bullish on USDJPY also…

So the bad news is that we’ll probably end today still within range but the good news should be that next week has more potential for a directional move…

As always in December… take care and be aware…

Have a great weekend
Ian Copsey

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Thursday, December 8, 2011

Getting closer to the end…


Another typical December trading day… If there’s a more difficult way to get from A to B then the market will take it… and made that choice yesterday. There do seem to be some positives in all this and I sense we’re not too far away from a sharp breakout from the current consolidation but there’s still some risk of dull, boring, listless, lackluster, lethargic and comatose trading before it happens. It’s not particularly earth shattering information to say that the market appears to have little interest in pushing the extremes right now… However, it has to happen at some point and it’s not that far away – possibly even as close as later trading but if it’s going to happen then I reckon latest by tomorrow.

The two currency pairs to watch are GBPUSD and AUDUSD, both of which appear to have the strongest risk of follow-through higher. The risk is that the final legs will last just a bit longer and stretch the consolidation just a bit more. Thus, use these two as markers that could highlight a broader based move.

USDJPY needs a special mention. It’s really not doing very well is it? Each bounce in the 77.60-65 support area seems to get weaker and weaker… It’s stretching my patience and also the tentative bullish outlook I was beginning to build. We need to be aware here as there are a few alternatives – two bearish and one bullish – and it’ll be important to note what is expected of each alternative to confirm the correct one. Needless to say, this requires some attention to guide us through to the final outcome. Whichever occurs it’ll either be straight up or down a bit more and then up. There does seem to be a restricted downside risk now.

So for today, remain in observant mode and probably best to anticipate consolidation but with the awareness of what would constitute a break lower in the Dollar…

As always in December… take care and be aware…

Good luck
Ian Copsey

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Wednesday, December 7, 2011

The consolidation still doesn’t look complete…


It really gets very difficult to provide extensive constructive advice when in a consolidation… We saw some Dollar gains yesterday albeit not as deep as I thought it might go but even worse than just writing “the consolidation should continue” I feel that it has potential to last for much longer. In truth it could actually extend even longer and potentially to the end of this week.

I should try and describe that just in a bit more detail. For Elliotticians we have seen a 3-wave move and in the current position that could be a completed correction or, of course, it could form a complex correction and with the way things are going most likely a triangle, which will be really quite painful to sit and suffer. Certainly, if I look at the Dollar Index it does seem to have potential for another push higher in this correction and that’s the basis of my reasoning for the current consolidation to extend longer.

However, after the limited gains seen yesterday consolidation doesn’t really indicate Dollar strength… so it has to come from somewhere. Where I can see it developing still is in GBPUSD (slightly) and most likely in USDJPY. In contrast, if there is any stronger risk of Dollar losses it’s in AUDUSD but only after a little more consolidation. Therefore, the picture being painted is one of another dull day but with what could be a push higher in USDJPY and possibly lower in GBPUSD.

In the background of all this is the underlying risk that the Dollar will just lose out against the Europeans. It’s not something I favor but given the current position also not something we should forget since it could be one of those super-sharp moves that’s over & done in a flash…

As always in December… take care and be aware…

Good luck
Ian Copsey

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Tuesday, December 6, 2011

Dollar strength… or consolidation?


The day started well enough, the Dollar displaying the weakness I preferred but ended the day back towards Friday’s highs. I want to call this a pullback but I can’t say I’m filled with confidence… On the other hand I find Dollar strength conflicting when attempting to marry the individual currencies together… The conflict I see is that if USDCHF rallies to new highs then it would indicate a much larger reversal. I’m not sure that really fits with EURUSD and GBPUSD… probably AUDUSD also… I could take a lower consolidation in EURUSD but not in GBPUSD that would require a new low.

The other thing of note, not directly related with Forex but just another warning signal, is that the U.S. Indices need a pullback at this time which would indicate a firmer Dollar. I don’t really expect that correction to be too deep so is perhaps more indicative of either a consolidation or just a deeper pullback in the Dollar.

Therefore, rather cautiously I’m more in favor of a firmer Dollar today but the extent is just a little vague and what it does to the structure a lot more confusing. But then, this is December so perhaps it is what we should expect…

Just a note on USDJPY… yesterday’s pullback lower was healthy though I wouldn’t really want to see it dip much more than we’ve seen already if this is to push back higher again. EURJPY looks to be in a similar position to EURUSD so my feel is that we’ll probably see some sideways consolidation in USDJPY while EURUSD extends its losses to reduce the impact of the downside in the cross.

As always in December… take care and be aware…

Good luck
Ian Copsey

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Monday, December 5, 2011

Dollar testing the limits of its pullback


Silly season is well and truly upon us and what appears to be the potential for the next 2-3 weeks to be rather messy and unpleasant. The rule of thumb is… expect the unexpected but if you’re expecting messy consolidation followed by a break of 5 points and a total reversal… then expect the expected.

Friday was not quite like that although EURUSD made a new high and whipped back lower. The Dollar highs seen by the end of the day were pretty close to the limits of a retracement. In terms of USDCHF it can’t really get much higher without risking a stronger follow-through. The same can almost be said for EURUSD and GBPUSD but they still have a little more leeway before the Dollar bearish move I have been eying breaks down.

Thus, I remain cautiously bearish for the Dollar but would like to see this confirmed today by some solid losses. At the same time I’ll keep an eye on the limits of any corrections. I do suspect that the losses, assuming them come, will be either rather untidy or will make s sudden rush. I’m not sure there’s an “in between.”

Overall I look at EURJPY and see that having broken key retracement resistance that tends to suggest it goes higher. Well, there is the risk of sideways consolidation but once complete the implication is for additional gains. So what takes it higher? EURUSD or USDJPY… or even both maybe? The latter has made a rather ratcheting and confused rally over the past three days, breaking above resistance and, from what I perceive, to be a break higher. I would have preferred a more strongly defined rally but the combination of this and its cross moving above key resistance does look quite bullish. If that’s true of USDJPY then there is an argument for it to have found its 33 year cycle low at 75.57. Be aware of that risk…

As always in December… take care and be aware…

Have a profitable week
Ian Copsey

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Friday, December 2, 2011

More consolidation or further losses?


It seems Wednesday’s Dollar losses were a bit too much of a shock for the market that it stopped dead in its tracks in fear. I made a small perusal of a few Elliott Wave sites and even saw some predictions for GBPUSD to rally to at least 1.78. There, or even a bit higher, has been my alternate target but it is way too early to begin to contemplate after just a few days of recovery.

At this point, yesterday’s subdued reaction is slightly disappointing but considering the sort of daily structure I think we’re seeing, perhaps it shouldn’t be too much of a surprise. There’s even risk of continued sideways consolidation today. However, I do feel that overall we’ll see the Dollar lose out whether it resumes today or early next week. It’s more a case of patience and observation. Should here be a deeper pullback then I don’t see it being much beyond yesterday’s Dollar highs.

A word on USDJPY… It did what it has become accustomed to doing… pretty much nothing… I can’t say it has broken its downtrend but I don’t see much upside left before we seriously have to consider the potential for another rush higher. I have the same doubts over EURJPY also which has turned its nose up against the downside it seems. Of course, it could be EURUSD that takes it higher but do note that if USDJPY rallies too far it would appear to have quite bullish implications…

So the message is basically the same as yesterday… note break levels… Until they break there is still risk of a dull day. Otherwise the outlook remains Dollar bearish to me…

Have a great weekend
Ian Copsey

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Thursday, December 1, 2011

Over the edge…


Well, that’s it… Today is the official start of the silly season… Not only is that due to the fact it is now December which will mean that the market will rapidly lose interest in doing anything, but also yesterday’s losses in the Dollar have implied we are now (almost certainly) in a daily triangle in GBPUSD and EURUSD. What do triangles mean? S&M… in the form of false breaks, whips and getting caned.

I pointed out in the U.S. Indices report that there was a risk of direct resumption of the uptrend. Perhaps the central banks got wind of my comments…

Right. Overall I reckon AUDUSD is probably a good buy & hold. That’s due to make a new high over the month whereas I can’t see this happening in the Europeans.

We should see follow-through lower in the Dollar today as more of the market will likely give up on their long positions… This first move will probably be the easiest of the month. Once we get to those lows the month will probably go downhill quickly.

This development may well complicate EURJPY also and much will depend on whether USDJPY maintains its current consolidation structure. I have occasionally mentioned that USDJPY has achieved the minimum projection from the 1982 high around 277.00. Currently it is reacting well within a bearish structure that would keep it within the recent range. However, EURJPY really needs to go lower now to maintain its own bearish structure. This could be a tough thing if EURUSD rallies too high or even if the bearish structure in USDJPY breaks down.

I suggest a lot of care at this point as it wouldn’t take too much to take this off-course. For the moment I’m bearish Dollars all round so it implied a mostly stable cross – but that isn’t what I feel the structure is implying right now. Be aware of what constitutes a break and the implications particularly in USDJPY and the cross…

Good luck
Ian Copsey

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