Gee, this extension higher in the Dollar is taking it’s own sweet time… The early deeper corrections fell nicely in the right areas for EURUSD and USDCHF to start building the foundations for the Dollar strength. We have probably seen the initial foundation for the stronger move, or it’s very close, and thus the day should spark some stronger directional moves. If it’s fast enough it may just complete the rest of the wave but we’ll have to allow until early tomorrow. When this has completed it does suggest the correction lower I have indicated over the past couple of days.
It is noticeable that GBPUSD has bucked that trend, the deeper recovery yesterday confirming the low at 1.4985 – just 7 points above the target. I think it has rallied enough for now and thus the risk should be lower today but clearly we shouldn’t expect new lows now. Therefore, be aware that the decline in GBPUSD will have more risk of choppiness compared to EURUSD and USDCHF.
AUDUSD is another that extended its recovery yesterday. I’m a little more open to gains here although I can see two alternatives. However, if it is to push higher then it must be directly else suffer the same fate as the Europeans. I’m open to both sides – go with the first break.
USDJPY behaved rather limply yesterday that disappointed. The correction was much deeper than normal for the position it’s in although it still held within the overall “requirements” for this wave. However, I do think it is now time for it to press its case for another rally. I can’t see it galloping higher at this point and the rally may well be fairly sedate. This tends to suggest that EURJPY may well drift lower. I had begun to think that it may suffer a deeper drop because of EURUSD but this seems to be less likely now. I’d actually like to see it rally but find the circumstances of EURUSD and USDJPY just don’t seem to support that outcome. Thus, it’s probably another day to avoid the cross and focus more on straight Dollar-currency pairs…