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Continental Confusion: Which Button To Press?

Published 05/22/2014, 12:54 AM

No, my keyboard didn’t get stuck. It represents total confusion over the two Continental Europeans. The lack of losses in the dollar and more direct gains, even if by a marginal degree, would appear not to make sense. Dollar bearish divergences have been broken – although arguably, should we now see losses then 4-hour momentum would still generate another divergence. Hourly momentum looks firm. However, both provided a Key Reversal Bar in the 4-hour charts to hot both hourly and 4-hour Price Equilibrium Clouds. Nor have we come particularly close to (dollar) swing lows that would confirm the divergences.

Thus, we have a big conflict and one that needs confirmation on both sides of the market. At this point, I’ll add GBP/USD into the equation. Now, this provided a decisive rally that reached just 2 points above my target. In the process it has destroyed an alternative bearish impulsive structure. Thus, the implication is bullish – but whether direct or following a deeper correction is the next puzzle.

The Aussie extended a little lower to an unusual projection that I don’t normally see, but is valid. We should see a correction but the downside is not yet over.

USD/JPY exercised its prerogative to see the extension lower from 101.67 to a deeper than normal final leg in the current wave. Therefore, it moved marginally below my lower target at 100.87 and shot back higher. Now, this is where we should see a long sideways range and what could be, over the next few days, a rather messy and whippy development due to earlier shallow corrections. Play the range in this one.

Quite what EUR/JPY will do is very clearly influenced by the range trading in USD/JPY, and obviously by EUR/USD but as mentioned above this influence is less obvious and will require some delicate handling. Thus, overall the cross has a mix of influences and a slightly uncertain structure, at this point, I still feel that the larger picture still errs on the downside.

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