Wednesday, February 22, 2012

I still see the Dollar weakening… but it looks like we need a correction first

Well, that wasn’t very convincing yesterday… Right across the board the expected moves just failed to materialize. Attempts to push the Dollar lower were met with a solid block and whippy moves that have soured the immediate bearish structure. Indeed, it has become so complicated that it seems more likely that we’ll see consolidation for another day or two. I haven’t changed my underlying view but need to adjust to the immediate confusion and allow for a more complex corrective structure to develop and complete before the downtrend resumes.

Perhaps of all currency pairs the Pound exemplified this by refusing to push above the 1.5880 high and instead drift lower. This pair, was the exception in the long correction by forming a corrective structure that could extend into a more sideways consolidation, and so it appears to be. Perhaps ironically, if I have judged this correctly, it may well be the simplest structure to follow in terms of extremes rather than the internal development that still may well be quite messy.

In all this mess I do feel we shall need to allow for a new high in the current move in the Euro. It shouldn’t reach the 1.3321 high but once peaked should make a messy drop back lower. In some ways I am quite content with this as I have a series of upside targets in the U.S. Indices that should hold for a correction lower – not a deep one but enough to work well with the Dollar outlook. Once that correction is complete it suggests further gains that should work in concert with the expected follow-through in the Dollar.

The Yen is bugging me a bit. I’ve been looking for a deeper (and long in time) pullback. I still prefer this but it’s been stubbornly persistent. A little care is still therefore required but be aware that the lack of any deep correction since the 77.36 low does imply a deeper pullback at some point…

Good trading
Ian Copsey

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