Wednesday, January 25, 2012

Flip of the coin…

The market sure seems to be bent on selling Dollars… Further marginal new lows yesterday, in EURUSD and USDCHF just about holding to extreme projections while GBPUSD has moved beyond that. Just commenting on currencies alone the depth of correction is pretty much an unknown quantity. The Dollar bearish structure is within an internal correction that can be limited to as little as 23.6% but can go to 85.4%. So from that perspective the range is not too helpful. What’s more, the projections for the next leg lower can be absorbed quite comfortably probably from either extreme of the retracement, though a 23.6%-50% area would be the most likely.

I have actually based my expectations more on the U.S. Indices. Monday’s highs were all projections I’ve had for 2 weeks or so, imply modest pullbacks that should take some while to complete. Hence the call for deeper corrections in Forex.

Today, I am told (as I really don’t take any notice of fundamentals) is the FOMC. Normally that implies pretty dormant trading for the next 20 hours… So from that perspective we can probably take our cue from the release. In terms of Forex we can only but acknowledge that the major direction is Dollar bearish (against the Europeans) and thus any further weakness could well release any restrictions and fuel additional losses that do suggest quite a solid follow through on the downside. Otherwise look for a day or two of continued correction before that move develops.

A word on USDJPY… It saw strong follow-through higher and is close to a pullback itself, but not by too much before it can make it back to the 78.28 high and possibly just above. How it reacts at that point could determine the move into the end of the financial year…

Good trading
Ian Copsey


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