Friday, February 17, 2012

Issue solved… case closed

Yes, I continued to get bugged yesterday. I had been watching the Pound lead the correction lower from the 8th February high and saw that in its position within the structure there was very limited downside. It was very critical support that on break would send price right back to the 1.5233 low. The Euro had started slowly but with an undetermined retracement apart from anywhere between 1.2623 and 1.3155. Thus, with the Pound approaching its downside limit I had assumed that the Euro’s decline would be similarly limited… Of course, we now know that the Euro decided to outstrip the Pound.

Well, all’s done and dusted now. I’m happy again and the good news is that we should be on the next leg lower in the Dollar. Keep in mind that once this decline is complete it will mark the lowest you will see the Dollar for many years…

Ok, first legs of the move are probably done with and thus the main risk today is for a correction. This could take many forms but most likely, given the long U.S. weekend we may find that it becomes a rather complicated one. I’ll add that in the Pound’s position the pullback should not be excessively deep and that is therefore potentially pointing to a complex correction that could even generate lower lows that this morning’s but then a recycling. Bottom line is that when the next drop in the Dollar does seem to be pointing to a strong directional one so be prepared to jump on for a ride.

A note on USDJPY… further highs seen and this is looking more and more like the real thing. It’s probably worth being absolutely sure by a break above the 79.53 high but right now the structure is developing pretty well. Having said that the 79.53 high should hold on first test… The second test has more chance of breaking it… This is also being reflected in the cross against the Euro and it’s likely that the cross will provide the best return.

Have a great long weekend
Ian Copsey

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