There Are Signs Of A Possible Flat Trading

Did you hear the screams in the roller coaster ride late yesterday? In the EUR/USD it looked more like a bungee jump. The question is now whether they’ll haul the bungee jumper back up to the launch point or let it twang a few times back lower. Indeed, that does seem to be the puzzle to answer over today. There’s no real bullish divergence in the hourly or 4-hour chart in EUR/USD, but then we haven’t seen a trend so it shouldn’t be expected. There’s a whopper divergence in the GBP/USD and possibly in USD/CHF. However, as always, divergences need confirmation and that’s the thing we haven’t seen yet. We need a break of the last major swing levels. Until that point we shall have to sit on our hands, be patient and observe the structure being developed.

While noting divergences I also see that the Dollar Index has a nice fat bearish divergence in the right area I mentioned in the weekly report. However, as mentioned yesterday, just be aware of break levels.

The AUD/USD has continued to develop quite well. It is always a tough little cookie that seems to have its own way of creating waves with a lot of noise in development but through the ups and downs seen in the Europeans the Aussie has steadily continued on its own journey and should do so again today. I don’t think it’s going to be a one-way affair but the next intermediate target is not a million points away now. That next upside target should see a slightly bigger reaction.

The USD/JPY seems to have bottomed out at 97.99. It hasn’t quite cleared expansion levels and that needs to be breached first. If there is any clue it could be in EUR/JPY that does seem to have a clearer route higher so it will be a matter of observing both the USD/JPY and EUR/USD for their respective upside break levels to see which drives the cross higher. I’ll go with the USD/JPY but clearly take care until the rally is confirmed.

The AUD/USD and EUR/JPY look the clearest of all but with limited moves, while the USD/JPY potentially better. But, take care first and leaving the Europeans waiting to catch the bus behind them.