Thursday, January 26, 2012

The Dollar looks extremely vulnerable…

Yesterday went right down to the line – the FOMC one – and sparked the resumption of Dollar losses. Indeed, the outlook for the Dollar does not look healthy at all and as warned, once the correction had ended the risk was for potentially substantial losses. Therefore, it should now just a matter of the correct pullbacks but within a predominantly bearish direction.

Having said that there are intermediate barriers to watch out for marked by key swing highs/lows that could well contain the move today. The 1.3197 swing high in the Euro is one, the 1.5774-79 highs another. I can’t see that they’ll hold for too long but definitely areas to exercise additional care. Overall I feel this can be quite a direct move.

USDJPY… retested the 78.28 high precisely and dropped. However, if I look at the manner of the rally I can see potential for yesterday’s high to only be part of a stronger rally. There should be support not too far below where we are now so if this doesn’t get below 77.00-20 then be aware of another leg higher… That seems to be echoed to a certain extent in EURJPY but to a lesser extent before a pullback. That could either be generated by a break below 77.00 in USDJPY or that we merely see a holding pattern for USDJPY before stronger gains… Again, this is something to observe and be aware of the alternatives.

Finally, the Aussie is very much in the same position as the Europeans… gains expected here too…

Good trading
Ian Copsey

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