FX Majors Back To “Steady” Development

I was taken aback a bit by the activity in the Asian morning yesterday. I’m really not used to seeing such trending moves in this part of the world. Over the day the roles between East and West appeared to have reversed – though I don’t really expect a repeat, but more a reversion to the normal status quo.

USD/JPY has been playing games. Yesterday’s outcome worked well in terms of the follow-through and reversal – although just a touch higher than I had estimated. The puzzle in this pair is that the recovery from 98.89 was exceptionally erratic and I cannot be totally confident of what we saw to reach 103.38.

My approach to this was to see if a 3-3-3-3-3 move would develop. These can be either a single impulse wave or a triple three. The difference between the two is ratios and alternation. One alternative element of alternation is the potential for a deep Wave (b)/(iii) or deep Wave (b)/(v). This has happened. This places us back into a position where we need to see what happens next.

The Europeans worked well – although quite frantic in the early hours – but have settled down now. The Continental Europeans are basically in tandem, but there is a possible alternative in GBP/USD following its dive-bombing. Such was the decline, with sketchy development because it tended to be quite direct.

There is a risk of a deeper pullback higher – but I wouldn’t fight any downside… The downside targets are beginning to firm up but equally – either directly or later – the risk is for a deeper correction higher. Watch your step.

The Aussie completed its decline then almost completely reversed back to the 0.7544 high. This is rather like GBP/USD in terms of a possible deeper correction above 0.7544 or just direct losses…

EUR/JPY is looking more and more like it doesn’t like the outside world and just wants to remain in its cosy sideways consolidation…