These markets are strange at the moment. While there are some correlated moments, the overall impression I get is a bag of mixed nuts. Some are big, some are small and others just lie around because nobody wants them. I have to admit that some of yesterday’s moves were also quite nutty.
To try and work out work out what is happening, we are beginning to get strong dollar bearish divergences in the Continental Europeans. Their respective 4-hour Price Equilibrium Clouds remain (dollar) supportive, and I’d like to say that in EUR/USD we may have seen a low.
However, the follow-through higher in USD/CHF doesn’t seem to make much sense in terms of structure when reaching the 0.9696 high. Equally, EUR/USD hasn’t done anything wrong – in fact it has seen some good moves, but this does tend to conflict between these two pairs. If there is any way they can correlate, then it’s for a minor follow-through higher in the dollar and then a reversal. It would certainly look right for EUR/USD, but the structure in USD/CHF is a lot less clear.
If there’s any way of ratifying this outcome, perhaps we can work with GBP/USD, but it is really in a neutral space. The 4-hour Price Equilibrium Cloud is pointing gently lower but it wouldn’t take much to begin rallying again – particularly with both 4-hour and hourly momentum displaying bullish divergences. Thus, the general feeling I get is for a reversal lower in the dollar, but how these three will manage the process/structures is a little muddled.
The Aussie, having hit 0.7307 – then dipped to 0.7300. This appears to have touched a higher degree target but will need another new low before a deeper correction. This tends to correlate with EUR/USD…
The JPY pairs both had a strong day. EUR/JPY appears to have confirmed the base is in place while USD/JPY made a strong recovery, but with the structure really quite tough to judge in such a direct move with minimum corrections. These tend to make working out the correct structure rather precarious. However, USD/JPY does have a bearish divergence, but the key to that is making sure that it has broken key lows. In comparison, EUR/JPY doesn’t appear to have completed its rally. So we have a slight conflict here too. Much depends on the individual pairs…
While reversals can be seen, I doubt we’ll get strong moves – or only at the tail end of the day.