Wednesday, February 1, 2012

Time for Dollar losses to resume?

Well, that was a bit of a mess yesterday… but then it was always going to be a trying day… However, there were a few pointers that came out of yesterday’s price action that have required a reshaping of the rear guard and what looks to potentially be a resumption Dollar losses.

First & foremost EURUSD saw a deep move lower and stalling in an area that satisfies the pullback in terms of ratios. It could be complete but there is a small risk that we could see one last attempt to reach the maximum pullback.

Next are the developments in the other Europeans. USDCHF did not reach the 0.9080 target but if the Dollar resumes its losses in earnest it certainly won’t stop at 0.9080… If there is any chance it will be that EURUSD decides to choose the snafu option of the mildly deeper correction. However, that said, GBPUSD broke above the all important 1.5774-79 highs. It hasn’t taken off yet but could do… To be honest, I prefer that it does extend gains today and that would imply (as long as the other two keep up) that we’ll begin to see the Dollar begin to wilt today.

Another little clue to look for is from the EURJPY cross. It dipped just a bit more than I thought but within boundaries of a pullback. Now, if this gets much further lower it will begin to suggest a move right back down to the 97.03 lows… However, at this point I can’t see USDJPY carrying that burden so unless EURUSD confounds by dropping the argument does seem more bullish for the cross. I don’t see it making excessive new highs and actually quite limited – but that is more in line with what I see in a push higher in EURUSD and then reversal. While USDJPY can still make downward headway it should be a lot more choppy and with at least one deep pullback.

Thus, cautiously, I feel the argument for Dollar losses to resume today are quite strong… If not then we’re in for some weirdness…

Good trading
Ian Copsey

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