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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