Asia stocks mixed; Australia gains on soft CPI, Japan steady before BOJ
Not too many surprises yesterday in the currency markets, in fact maybe no surprises, but there were a few areas where things became a bit bogged down and messy. The continued gradual gains in the euro did at least clarify the picture there and was pretty well matched by the other two Europeans.
Indeed, this general weakening in the U.S. dollar should continue for a little longer, definitely through today. How long is more a factor of how much hard work and effort the market puts into moving a relatively short distance. Once this process is done and dusted, the outcome should be a quick burst of dollar strength but one that should then see another round of corrective consolidation.
There is, however, one small risk in this scenario for the Europeans. While I can see EUR/USD dipping and USD/CHF rallying it looks like GBP/USD has a lot higher to move to satisfy its retracement target. I therefore feel that it may well suffer only a limited reaction lower – more in a correction – before seeing the general upward correction resume.
Thus, it's best to focus on EUR/USD and USD/CHF which have fairly well defined limits in this current correction and also very clear targets for the next rally in the dollar.
The Aussie dipped pretty much in line with expectations – 7 points more than anticipated. That doesn’t sound like too much, but it actually clarifies a slight ambiguity earlier in its development from 1.0340. I'd suggest caution with this pair as it has a unique ability to make up things as it goes. Work with breaks.
The JPY pairs had fairly similar days, initially dipping lower but recovering. Particularly in USD/JPY, this bullish development from the 91.13 low has been very constructive and played through well as I was going through this morning’s analysis. As such, while there is a final hurdle to overcome, the outlook is becoming stronger. This is worth watching since, as long as key support levels hold, we may well be resuming the larger uptrend.
If so, then we’re going to witness a battle between a bearish EUR/USD and bullish USD/JPY. My feeling is that the upside in USD/JPY probably has more umph to it than the downside in EUR/USD and thus the general direction in EUR/JPY should be higher but most likely with a more stuttering performance.
EUR/USD and USD/CHF are probably the pairs with the most clarity, followed by USD/JPY and probably AUD/USD also seeing losses but take care with this one as recently its tendency has been to move in complicated structure.
Indeed, this general weakening in the U.S. dollar should continue for a little longer, definitely through today. How long is more a factor of how much hard work and effort the market puts into moving a relatively short distance. Once this process is done and dusted, the outcome should be a quick burst of dollar strength but one that should then see another round of corrective consolidation.
There is, however, one small risk in this scenario for the Europeans. While I can see EUR/USD dipping and USD/CHF rallying it looks like GBP/USD has a lot higher to move to satisfy its retracement target. I therefore feel that it may well suffer only a limited reaction lower – more in a correction – before seeing the general upward correction resume.
Thus, it's best to focus on EUR/USD and USD/CHF which have fairly well defined limits in this current correction and also very clear targets for the next rally in the dollar.
The Aussie dipped pretty much in line with expectations – 7 points more than anticipated. That doesn’t sound like too much, but it actually clarifies a slight ambiguity earlier in its development from 1.0340. I'd suggest caution with this pair as it has a unique ability to make up things as it goes. Work with breaks.
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The JPY pairs had fairly similar days, initially dipping lower but recovering. Particularly in USD/JPY, this bullish development from the 91.13 low has been very constructive and played through well as I was going through this morning’s analysis. As such, while there is a final hurdle to overcome, the outlook is becoming stronger. This is worth watching since, as long as key support levels hold, we may well be resuming the larger uptrend.
If so, then we’re going to witness a battle between a bearish EUR/USD and bullish USD/JPY. My feeling is that the upside in USD/JPY probably has more umph to it than the downside in EUR/USD and thus the general direction in EUR/JPY should be higher but most likely with a more stuttering performance.
EUR/USD and USD/CHF are probably the pairs with the most clarity, followed by USD/JPY and probably AUD/USD also seeing losses but take care with this one as recently its tendency has been to move in complicated structure.
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