U.S. consumer prices rise by 2.7% in June
The market was relatively quiet over the past 10 days, but after naughtily touching the expansion levels in EUR/USD and USD/CHF at 1.2123 and 0.9918 respectively, subsequently decided that further consolidation wouldn’t be a good idea. This points to further gains in the dollar although the development looks as if it can be steady rather than see the New Year begin with a bang. Indeed, this pattern of development looks set to continue for a while with relatively modest corrections. In terms of how this fits into the larger picture, I outlined in the video on the Dollar outlook for this year, it is basically on track but I suspect a relatively deep correction once this current rally is complete.
The pattern of a firmer Dollar is good across all currency pairs, from the Europeans through USD/JPY and AUD/USD. If I am to point to any particular pairs that could see a stronger follow-through compared to others, then I’d suggest GBP/USD and AUD/USD. From this perspective, while it is just an estimate, I’d suggest that the dollar strength could last through to the end of Q1. I’ll add that it would be useful to also watch major equity markets, particularly in the U.S., which are due to make a very, very, errr… VERY significant high.
If there is any room for volatility, then I would suggest it will be in the corrections – generally in the Wave b / v position and potentially on Wave b / iii, the risk being for a generally choppy start for the year.
Being a Friday, I doubt we’ll see particularly strong moves, so best look for short term trades but perhaps with more potential movement in GBP/USD and AUD/USD. However, with market liquidity likely to be very low, do take care and use trailing stops or plain take profit orders.
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