Thursday, February 9, 2012

Slow going but Dollar losses still on track

It was hardly an emphatic performance yesterday in terms of extending the losses from Tuesday but basically positive nevertheless. There does still seem further to go and I see this more a matter of coordination in terms of the individual currency pairs. I’d like to say that the losses could actually accelerate to a certain degree today but there are a couple of “issues” that need to be resolved with the Pound and Aussie. Both saw sharp losses but from the anticipated areas yesterday. I am rather mixed on the Pound but feel that the Aussie does have some early risk of extending those losses. The end result should be for them both to recover – and that’s the balance we have to observe in terms of the correlation with the Euro and Swissie.

Thus, it looks like a cautious start to the day with emphasis more on observing the initial moves and how they fit in with each other. However, overall the basic Dollar downtrend remains in place and I don’t think it has quite finished yet. This is actually now more a case of identifying the final lows that will provoke a correction to the losses seen from the high on the 13th January.

Elsewhere USDJPY poked its head above 77.00 which was not expected. I could just get bullish here, especially considering the firmness also shown in EURJPY. However, there is a possible alternative if I had misjudged the decline from 78.28 so until yesterday’s high is breached there is a sense of caution. To better judge this, the cross will be interesting to watch as there have been potential signs of quite a strong rally. It’s still a little touch and go but if there’s much more upside we could find this looking very strong. At that point we’ll have to see whether it’s the Euro or Yen that is the main driver.

In summary for today, be more cautious until European trading but probably we’ll see some more definitive moves in the later stages…

Good trading
Ian Copsey

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