The Question Now Is Whether We See A Deeper Correction Or Direct Follow
Ian Copsey | Aug 16, 2012 02:34AM ET
There weren’t too many surprises yesterday with expectations mostly satisfied. Focusing on EUR and CHF in particular the dollar’s gains were pretty much as expected and actually hitting initial targets quite accurately. Having said that, I’m not totally convinced with the structure that developed and this is giving rise to a short-term balancing act between direct follow-through and a deeper correction.
I have also been mentioning the price equilibrium readings that by yesterday had seen the dollar break above hourly equilibrium and thus needed to break above the 4-hour also. Well, that occurred. Not by a large margin but any advent of a deeper correction would retest the 4-hour price equilibrium support – and I suspect hold for the uptrend to extend.
I don’t see too much problem with that but GBP/USD remained stubbornly in a tight range and shunned the opportunity to extend losses. It really doesn’t have too much of an upside buffer before it would look a little more bullish. That bit concerns and needs to be observed.
Otherwise, the general picture does still err quite firmly on the dollar’s upside and was given another fillip by AUD/USD that extended losses and thus still remains bearish.
USD/JPY also failed to lie down and die and remains above its 4-hour price equilibrium levels so continues to permit further gains. This still does have an upside buffer but with hourly momentum now showing a bearish divergence and 4-hour certainly moving that way, even if there is another marginal new high I still can’t see any divergence from the basic, underlying bearish structure. This is making the downside in EUR/JPY less direct but I still can’t see that the cross can make new highs now – or only marginally – before it also begins to satisfy it’s bearish leanings…
Thus, today has some potential for pullbacks in the first half but overall I still feel we should be planning for further dollar gains…
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