Wednesday, February 15, 2012

Approaching the limit

Yesterday sprung a few surprises. The warning came with the Euro stalling breaking below the 1.3155 low while the Swissie didn’t manage to break above 0.9200, an event that would either mean we would see direct resumption of the Dollar downtrend or a more choppy route to lower levels. Even the Pound has dared to push the limits of its retracement support and thus causing all three to probably require yet another push in this correction before the Dollar can finally resume its downtrend. Certainly, all three are now beginning to see Dollar bearish divergences develop in the hourly charts which encourages the expectations.

However, first things first, the initial risk should be for further corrective highs. Once this Dollar high is established we can begin to plan the development in each of the Europeans, all in different segments of their own structures. What does strike me is that the Swissie probably has the edge on the other two in terms of the directness and strength of the decline. Thus, for the biggest bang for your buck I think this is the better vehicle.

One more currency pair that surprised was USDJPY… The push above 78.28 was not really expected. I could still make a case for the highs seen being just a deeper projection in the final leg of the large irregular triangle but I’m not so sure. Momentum seems more positive than negative and while I’m not expecting much follow-through higher today I feel the scales are tipping towards the upside. We shall need to watch how any move lower develops in terms of structure and depth. However, as we have been for some months, we are within the window of a 16.5 and 33 year cycle low and have achieved the minimum downside target. If this moves much higher – and to the 79.53 high and above I feel it will signal further gains towards the 85.52 daily corrective high. So, keep a sharp eye on this one…

I should add to the above that even EURJPY is beginning to display quite firm upside risk and much above where we are now could well mean we move much, much higher.

In summary for today, be aware of the risk of marginal follow-through higher in the Dollar (versus Europe) but look for selling opportunities…

Good trading
Ian Copsey

No comments:

Post a Comment