Friday, January 6, 2012

Yesterday’s targets met … and should indicate a correction

If Tuesday’s analysis started of the year on a bad note then yesterday’s brought some success. With the exception of AUDUSD and USDJPY all pairs ended the day within spitting distance of the targets I set for them. Even AUDUSD merely saw a deeper than expected correction. USDJPY just hasn’t yet reached its target. So, although the momentum conditions are not particularly favorable as long as yesterday’s extremes hold all appears to be back on target and should lead to Dollar losses today within a correction.

An interesting point is the EURJPY cross. This stalled 8 points below my target and should now see a modestly firm pullback. Given that USDJPY should still have a little further to go on the upside and EURUSD is also expected to correct higher the cross is probably the better bet today in terms of a bang for your bucks. What does need to be managed here is the balance between the degree of gains expected in USDJPY versus EURUSD. I suspect USDJPY will find a top earlier so don’t look for them to top out together.

A word on GBPUSD also... This was a little ambiguous in the analysis in terms of whether it has found its corrective low yet though in some ways the fact it stalled at the prior corrective low does lend support to a more bullish outlook. In the larger picture the fact that it hasn’t followed EURUSD to new lows does have potential to imply a much stronger bullish outlook for the coming 3 months. It’s still a bit “up for grabs” since it needs to fight off the issue of the expected losses in EURUSD and just how much correlation there will be between the two. If GBPUSD is to be strong then really I’d prefer it to be quite strong during this general Dollar bearish correction…

There is just one caveat I’ll add. The 1.2770 low in EURUSD is just 6 points above the higher of the two weekly projection targets. I have favored the lower. However, I can’t see that USDCHF has finished its rally and I still see (overall) downside for EURJPY. Therefore I’m not in favor of having seen the weekly low but take note of the break levels that would suggest Dollar weakness all round…

Have a great weekend
Ian Copsey


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