Friday, February 10, 2012

Into a high risk area where a correction is possible…

That was mostly a day to forget… lots of huff & puff but very little to show by the end of the day…

Perhaps it would be better to start with what did move – the Japanese Yen. As I was writing the report yesterday it struck me that for quite a few weeks I had been hammering on about a target around 75.97-12… Ok, it took me a while to realize that 76.02 was in that range but I am getting old… That target was a potential penultimate leg of a triangle that started on the 1st of August last year… Yes, I know it doesn’t look like a triangle but the ratios actually fit quite well and one leg is irregular (the dip to 75.57.)

So if 76.02 was the penultimate leg then we’re actually quite close to the end of the triangle… While this could poke above 78.28 it should not move above 79.53. Now, given the 16.5 and 33 year cycle lows are due in this general period we also need to be aware of whether this rally will stall and reverse lower for one more drop… or … it is due a bigger rally. The unfortunate complication is going to be the fact that whichever develops the risk is that both scenarios will require a move lower… So for the moment we move higher… but it shouldn’t last for too much more now.

Back to the Europeans… Finely balanced. The Euro is very close to the minimum projection to end its current rally. Momentum is clearly displaying sluggishness with the risk of Dollar bullish divergences developing. The Swissie almost reached the minimum target I set. The Pound… well… decided to take a tour of London. If I have any preference then I point to the Swissie which, with the prospect of a correction that needs to match with that in the Euro, suggests additional losses first. The Pound may well have found it’s high and should therefore see losses but the structure is about as complicated you can get for a directional move.

All I can suggest at this point is to be aware of the break levels that would indicate the next move and also that the Dollar should be due to correct higher at any time now…

Have a great weekend
Ian Copsey

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