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


No comments:

Post a Comment