Friday, January 20, 2012

The Dollar must rally now… or risk the potential that we found its high already

To be honest, if you look at the Dollar Index we have already seen the Dollar high… It’s now more a matter of how the individual pairs react…

Overall yesterday was quite a good day. The Euro reached its ideal target and actually to a slightly deeper retracement at 1.2971. However, there is one important element in EURUSD that gives me a few jitters. The nice solid looking hourly bearish divergence is no longer nice and solid, but could reform. In other words it has to go down now in order not to strangle the life out of the divergence…

Having said that, the Swissie reached its target too and needs a pullback. This shouldn’t get anywhere close to the 0.9595 high but it should recover. The Pound rallied and like the Euro to just a little higher than the favored target and may well mean that we’ll not see new lows. That one is touch and go… So bottom line, yes I do think the Euro is going to move lower – the crucial issue here is that more than ever the Euro decline needs to totally outstrip the any pullback in the Swissie. This would probably occur in a manner where the Euro dives but the Swissie manages only a grotty, choppy pullback. I’m open to the Pound doing either. In terms of the larger picture it doesn’t make any difference in the long run whether we’ve seen the low already or we see a limited new low.

What else supports the argument for a larger drop in the Euro? Well, EURJPY also reached its ideal target at 100.05. There are deeper and we cannot ignore them while USDJPY remains above 77.00 but this does look to encourage a bearish move back to the 97.03 low and beyond. I can’t see USDJPY fuelling that at this point.

The Aussie bothers too. Even yesterday’s (U.S.) Dollar weakness didn’t empower the Aussie to push higher… that’s a bit strange and does cause me some concern. I’d like to see it higher today but that it conflicts with how I feel about the (U.S.) Dollar in general I’m watching out over my shoulder…

Have a great weekend
Ian Copsey


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