Tuesday, February 14, 2012

Signs are pointing to the Dollar downside resuming

Yesterday’s price action didn’t come as too much of a surprise. Overall I feel there’s a strong risk that we’re reaching the end of the corrections that could see the Dollar downside resume. I have to add a little caution here as technically there is an argument for extended sideways consolidation in the Euro and Swissie. Perhaps it’s possible in the Pound as well but I have my doubts there. Let’s just say it is something to keep in mind.

Then what is the argument for the Dollar to resume losses? Well, partly the Pound could have seen its corrective low, but if not there isn’t much more room on the downside. The question is perhaps, how long can it go nowhere in such a tight range? I’ll also note the U.S. equities that have performed admirably in rallying back towards them. I still have them broadly bullish and therefore tend to correlate with Dollar weakness.

This general Dollar weakness is also reflected in the Yen. However, this shouldn’t occur directly. I still maintain that it needs one more push higher before reversing back to the lows. Therefore, the overriding governing influence remains on the Dollar downside and it’s more a matter of timing…

Therefore, for the first half of the day at least I suspect we’ll see the Dollar firm up gradually to marginal new highs above yesterday’s (in the Euro and Swissie and possibly Yen also) but then I’ll expect the downside to come back under attack. It’ll probably still not break range today but it’s something that could develop by tomorrow.

Good trading
Ian Copsey

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