Dollar Gaps Higher, Is A Correction Needed?

The low market liquidity remains and still risks a few moments when the wave development skips a beat. This seems to have impacted on the early correction I had suggested on Friday, but for the rest of the day the gains in the Dollar were pretty much as expected. Indeed, it chewed up quite a bit of the pathway I suggested with the two pairs I highlighted as the stronger performers, GBPUSD and AUDUSD, seeing quite a solid trend.

However, the Dollar has gapped higher on open but still looks to me as if a correction is needed. It will be best to take care to confirm this view. The problem is that there are alternatives and having been relatively comfortable with a less bullish view before open, I have had to struggle to adjust my expectations without the benefit of time to explore the range of currency pairs. This suggests some care and attention is required.

Across the board, 4-hour momentum is Dollar positive, and in all the European pairs the Dollar is well above the Price Equilibrium Clouds and to an extent that it will begin to see too large a deviation from the Clouds. In the hourly timeframe, the gaps have broken the potential for hourly (Dollar bearish) divergences. This is going to require some care until the gaps have been filled – and hopefully exceeded. It is perhaps the Aussie that has less momentum following Friday’s drop, but should also suffer a correction before losses resume.

The strength in USDJPY was a tad firmer than I had anticipated but the correction from Friday’s high was as expected. However, price has broken back above the 4-hour Price Equilibrium Cloud and should get a slightly firmer run higher… with just a mild risk of a minor new corrective low. The strength here does seem implied because of EURJPY. It may not be direct because there is still risk of new lows in the cross before it can stage a stronger recovery. Thus, take care.