Thursday, July 17, 2014

The next stage is going to be important

Dollar gains seen … good… They surpassed my intermediate targets… bad… or at least potentially bad. In particular this pertains to EURUSD and USDCHF. I can’t say they’ve gone totally off on the wrong track but once again the depth of any correction will be important. However, it’s not just these two. EURJPY broke the key support and has made a new low below 137.49. GBPUSD spurned the chance to reach 1.7202 and this tends to point to a more negative reaction. There also seems to be some opposing alternatives that have generated more Sudoku-like problems so the analysis will be guarded.

If there is any immediate common outlook it does look like a correction lower in the Dollar against the Europeans. This is the part where we need note depth and relevance to prior corrections. GBPUSD should ideally hold below 1.7190. The next stage following this correction will be determined to a certain extent by how deep this will be – and that in turn will need some due care and attention at the targets I have suggested. We do have Dollar bearish divergences in EURUSD and USDCHF but not that strong. We have the 4-hour Price Equilibrium Clouds supporting the Dollar.

AUDUSD performed well and while there is still some potential upside buffer, we should be expecting follow-through lower before too long. This is a pair where the outlook appears more set in stone.

USDJPY edged higher, flapped around a bit, looked around, couldn’t make up its mind and frankly the structure in the latter stages was short of clarity. We therefore have a mild puzzle to solve. At this point we have an upside barrier pretty much set in stone. Should this be tested then the ability to follow-through or succumb to a correction will generate the expected reaction – obviously a correction or direct follow-through higher. There does still seem to be some downside to go in EURJPY so depending on timing the downside in USDJPY could be the winner. It is, however, something that will require close attention.

Take care today. There do seems to be a range of snags that could develop…

Good trading
Ian Copsey  

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