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Dollar Corrects More Deeply Than Expected

Published 10/26/2012, 03:49 AM
Yesterday was strange. Very strange. Very, very strange for a variety of things including people jumping in front of trains at our local station and forcing my wife into a 1 hour detour to make a trip that normally takes 10 minutes…

Well, one thing wasn’t so strange and that was when I got frustrated with the Dollar correcting much deeper than expected against the Euro and Swissie. Now when GBP/USD just sailed off into the blue sky and quite clearly indicating it was ready to resume the underlying uptrend while the Dollar resumed its rally against the Continentals to have the two blocks in apparent negative correlation… that’s strange. Add to that the more direct rally in AUD/USD and which seems to want to push even higher and we have a tug of war in terms of what the Dollar wants to do…

Even USD/JPY managed to hit the overdrive and is still pushing higher. It may seem like a minor extension to a deeper projection but we have to understand the longer-term implication. This move is just the foundation stage of a larger wave degree. With this leg being so strong it promises an even stronger leg once the coming correction is complete… I think USDJPY is going to surprise a few people as we move into 2013… This is being seen in
EUR/JPY also, its recovery much deeper than I had bargained for and suggesting a similar overlap higher before a correction.
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So the battle over the next few days is going to be between the disparity between EUR and CHF with GBP and AUD apparently looking to go in opposite directions. Beyond that we have another conundrum to resolve in terms of the current move lower in EUR/USD that started from below 1.3172 while the rally in USD/CHF had its roots in a new low, thus implying the need for a corrective structure rather than a trending structure that we appear to be mapping out in EUR/USD. Unless of course, they both give up the Dollar bullishness directly. After all, yesterday was a strange day and today could be as well…

That all adds up to the basic need for awareness today, of what is required to see the Dollar extend gains against the Continentals and what constitutes a break. Be wary today.

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