It would have been nice if the States had a week-long public holiday. Clearly it’s nice to have a day’s break to refresh but coming back to a dull market, almost paranoid market, is not much fun. Having said that, Friday brought some mild surprises that have required a minor re-think. EURUSD performed not far away from expectation although the follow-through lower was a bit limp. It was interesting to see USDCHF make a minor new high while GBPUSD was more surprising in extending losses.
What’s to be made of these developments? A mixed bag really. GBPUSD is now generating both hourly & 4-hour bullish divergences so that needs watching. I feel there is still one more low to come there. USDCHF has developed an hourly bearish divergence but no 4-hour divergence but we have to allow for the fact that we can hardly call the move higher from 0.9021 a trend. EURUSD has a limp hourly bullish divergence but no 4-hour. However, it does have the potential for an inverse head & shoulders – still to be confirmed.
Throughout the Europeans the hourly and 4-hour Price Equilibrium Clouds are flattening. Thus, we are on a state of alert but with what appears to be risk of one more Dollar high. After that a reversal looks possible.
Of all the pairs it was USDJPY that turned higher more robustly and a little earlier than expected. I’m not convinced of direct gains yet. Indeed, I feel there is more potential for sideways range trading. That could still allow a new high but at this point the development I see doesn’t seem to be consistent with a runaway rally yet. The outlook I see in USDJPY seems to be consistent with EURJPY also. While it has recovered moderately firmly there’s a certain lack of logic in where it’s reached and the structure in which it has developed. Thus, both JPY pairs are still under scrutiny.
Thus, for the near term I’m not expecting massive moves. If there is anywhere to look for strong moves it may well be in the U.S. equity market…
Steady as she goes today. Be aware of what constitutes a break of the consolidation…
Have a profitable week