Monday, February 27, 2012

Time for a pullback soon, but the overall decline is developing well

Trailing stops would have been the right way to go on Friday and overall I still think the strategy should work although I am suspecting that a mildly deeper pullback is due. It took quite a bit of extended analysis to be able to make sense out of the structure since the 1.2974 low with the initial moves being rather noisy & choppy and this was not just in the Euro but elsewhere too. However, solid progress is being made and should still maintain the general decline in the Dollar over the course of the week.

Even USDJPY has taken on a more frantic look, again requiring a good deal of adjustment to the structure but what is becoming more transparent from these changes, along with the angle in EURJPY becoming almost vertical, is the rising risk that we’ve seen the 33 year cycle low. The rallies have accelerated and look pretty constructive but there are still barriers between the 85.50 high and around 88.00 that should prove critical. However, that is looking ahead a little bit so we shouldn’t get ahead of ourselves too soon.

I’ll leave it like that today, the focus really being on identifying the current anticipated lows in the Dollar for now and how far the corrections can bite. I suspect a slightly deeper pullback though not excessive except perhaps in the Pound that has a sense of great risk for a choppy rally with deeper pullbacks. I’ve been surprised looking around at how bearish people are for the Euro and Pound … which may well be a factor behind their rallies.

Have a profitable week
Ian Copsey

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