Tuesday, January 17, 2012

We’re at a key juncture within the larger Dollar rally

Friday’s Dollar gains were pretty much on the spot so we’re one step closer to the eventual high. However, not all is plain sailing and I had a rather mixed view develop as I went through the analysis today with the basic conundrum of seeing the decision between a sharp pullback or sharp extension pulling one way and then the other as I progressed through the currency pairs. If I favored a Dollar bearish correction in one then it would cause havoc with the structure of another.

In the end I have cautiously settled on the Dollar bearish although there’s still a risk of a minor new high before that pullback develops. The preference was borne of a product of the EURJPY cross. The downside in USDJPY appears to have broken down to imply a second push higher – probably still in a correction – but nevertheless a recovery. Equally EURJPY appears to require a deeper correction but one that should break above the 98.80 high. That factor implies that we need strength in EURUSD also and given that this pair has been quite consistent the argument does favor this outcome.

Now, the conflict I have is with GBPUSD and USDCHF within a Dollar bearish correction within an overall Dollar rally, and in particular with the anticipated eventual targets together with the structure required to reach them. This is what is in conflict with EURUSD.

The message here is: I’ll stick with the currency pairs that have developed well in the structures I have been following; that is, EURUSD, EURJPY and USDJPY. If today’s description of the type of moves I expect in these three break down – then follow the alternative route of Dollar losses extending. I would also add that even AUDUSD needs one more push higher in this segment of its own structure which again adds weight to the scenario call for a Dollar bearish correction.

Take care in the early hours – with more defined developments probably more likely to appear in European trading.

Have a profitable week
Ian Copsey


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