Thursday, February 2, 2012

Still further to go, but not directly…

Yesterday was a lot, lot better. The general structure is developing well and I can see a solution for the slight disconnect between EURUSD and USDCHF. It is also beginning to generate a potential framework for the more medium term outlook, which is still Dollar bearish, but indicating a reasonably shallow pullback once this decline is complete. In fact, this type of development actually suits GBPUSD as well. That is something for the coming week or possible two but something to keep in mind.

As for today there should still be some initial losses to go for the Dollar but not by too much before a correction is due. This will be fairly modest and by the end of the day, perhaps into tomorrow if the correction becomes complicated, we’ll see the final leg lower in this part of the Dollar decline. That should set us up for a Dollar pullback next week.

USDJPY bounced from the top of the 75.94-02 support on the dot to generate the expected correction. There are now two options: a direct move to new lows or a consolidation before the next drop. Perhaps the key point here is that once the next leg lower has completed we shall be due a deeper pullback – but that still implies new historic lows…

The general limited nature of the Dollar losses and the prospect of corrections has really brought EURJPY to a standstill. Well, a standstill within the confines of the 97.03-102.20 range. Obviously there’s plenty of room there for volatility so take care in the middle and look for opportunities at either extreme of the range…

Good trading
Ian Copsey

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