Fed’s Daly says 50-point rate cut in September may not be warranted - WSJ
As I mentioned Thursday, the correction in the dollar was not expected to set the world alight – mainly due to the depth of the corrections earlier in the sequence. However, even I was rather taken aback with the brevity of the correction and the depth just managing the bare minimum. Thus, the dollar spent the rest of the day in a rather sketchy and erratic decline that hardly provided an enormous amount of confidence.
I certainly don’t think the move lower has ended but the structure of the decline has been so complex it’s just a little difficult to really be 100% confident of close by levels. Having said that, my impression of GBP/USD is that there’s probably limited downside and on the assumption that we’re seeing a coordinated rally in the dollar against the Europeans, the general outlook should remain dollar bearish. The next intermediate target levels are fairly clear I think and therefore focus on the downside still.
USD/JPY… After it stepped off the cliff it has made a shallow sideways bounce and worthy of the suggestion of a “dead cat” being involved. I remain bearish but there I sense there are still some shenanigans lurking around so I’m rather reluctant to get overly bearish too soon. The risk I see is for the dead cat to bounce down a step further in a general sideways to bearish bounce before the stronger follow-through to the next intermediate target.
Thus, on this assumption – and I have noted the key support in the USD/JPY analysis – we have the potential for a bullish EUR/USD along with the skidding, sideways dead cat that could see EUR/JPY extend its rally. I am still just a tad hesitant as the 99.18 high was definitely more than enough for this bigger correction higher, but I feel we may need to be open for a marginal new high before the downside fireworks resume.
Therefore, today is a day to watch for signs of the dollar decline extending against the Europeans and noting the balance between USD/JPY and the Europeans while the next support in USD/JPY holds…
I certainly don’t think the move lower has ended but the structure of the decline has been so complex it’s just a little difficult to really be 100% confident of close by levels. Having said that, my impression of GBP/USD is that there’s probably limited downside and on the assumption that we’re seeing a coordinated rally in the dollar against the Europeans, the general outlook should remain dollar bearish. The next intermediate target levels are fairly clear I think and therefore focus on the downside still.
USD/JPY… After it stepped off the cliff it has made a shallow sideways bounce and worthy of the suggestion of a “dead cat” being involved. I remain bearish but there I sense there are still some shenanigans lurking around so I’m rather reluctant to get overly bearish too soon. The risk I see is for the dead cat to bounce down a step further in a general sideways to bearish bounce before the stronger follow-through to the next intermediate target.
Thus, on this assumption – and I have noted the key support in the USD/JPY analysis – we have the potential for a bullish EUR/USD along with the skidding, sideways dead cat that could see EUR/JPY extend its rally. I am still just a tad hesitant as the 99.18 high was definitely more than enough for this bigger correction higher, but I feel we may need to be open for a marginal new high before the downside fireworks resume.
Therefore, today is a day to watch for signs of the dollar decline extending against the Europeans and noting the balance between USD/JPY and the Europeans while the next support in USD/JPY holds…