Friday, July 18, 2014

Staring over the edge

Somehow the market seems to like a scary movie with the movie star trapped in a predicament. Does she step headlong over the cliff or is she rescues by a knight in shining armour? Perhaps the knight in shining armour turns out to be the baddie and pushes her over to her death.

We have several situations where this may occur. The Dollar remained firm against the Europeans, though has taken a look over the cliff face and is deciding whether to jump or pullback into relative safety. Are there Dollar bearish divergences? Yes - in EURUSD and USDCHF but not really in GBPUSD still has a little way to go to confirm any more persistent losses. Today, there could be a cliff-hanger in the Continentals but I’ll not commit until they are pushed by the evil baddie.

AUDUSD topped out at just about the maximum retracement and the pendulum swings back to the downside. This does seem a more straight-forward outcome although the lower degree structure has been rather clumpy. At this point I don’t think it will be a direct move but one with several shallow corrective phases.

As we begin the day USDJPY has also started down the cliff face, perilously close to the 101.06 low. Can the dusky leading lady manage to hold on to the cliff to be rescued? Well, it’s certainly my preference. No one likes such deep reversals when the rocks below look snarled and jagged. Equally, EURJPY did jump off the cliff edge and doesn’t seem to be held by a bungee rope… However, markets never develop without a decent correction. We should be on the look out for a modest correction – certainly not a deep one – before there is follow-through.

So which of EURUSD or USDJPY will take the leap? Or will there be a miracle?

Have a great weekend
Ian Copsey  

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