Back On Track
Ian Copsey | Oct 30, 2014 12:19AM ET
The statement by the Fed that the QE stimulus programme has now ended generated quite a stark comparison in the reactions in the Forex market compared to the U.S. stock market. Clearly the announcement was inevitable at some point and perhaps that’s why the indices barely reacted. It makes me wonder why the Forex market reacted with such vigour. However, from my perspective both markets reacted perfectly…
Focusing on the Dollar, the initial knee jerk reaction is just about done and from this point we should see more measured development. Typically in Asia we should see a pullback after the initial reaction. This being a correction we do have to be aware of the range of structures that can develop. However, this is probably the only area where there could be any possible complication – in the Europeans at least.
Now, the more complicated areas… The Aussie extended its gains and to a few points above the 0.8898 high from where the Yellin’ began and triggered the free fall. At this point it hasn’t made any clear break that would confirm additional follow through but because of the ferocity of the drop momentum has to be discarded as a useful tool and more we need to focus on break levels. Considering the expectation that the Euro should correct higher we will have to observe the relative performance between the two to judge whether the Aussie can retain any sense of a bullish outlook.
Equally, USD/JPY has pushed higher as expected, but this has been accompanied by both hourly & 4-hour momentum also pushing the upside limits. Recently, it has tend to correlate with the Europeans and does have a structure since the 110.08 high that would allow a full gamut corrective structures. Therefore I think we’re going to have to tread with care at this point. That EUR/JPY topped out yesterday was good and it’s more likely that it will be EUR/USD that drags the cross lower. So, if anything, we should see EUR/USD outpace USD/JPY.
Expect a slow first half of the day but then some better movement…
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