There was a mixture of outcomes yesterday, some good, some bad and some strange. It ended with some fine lines that cannot be breached when referring to the entire range of currencies – all of which appear to be in different stages of different parts of their wave structures. A push one-way by one pair could conflict with that of another. There could even be minor breaches in some pairs that wouldn’t necessarily impact on the group as a whole. Perhaps the most fragile is USD/CHF that has begun to see some broad swings that may be a potential triangle – or could just see a more definitive break.
So, as the day starts, there is a degree of caution. If there is any risk of a structure breaking, we shall have to see what impact that could have vis-à-vis the other pairs. My main preference is dollar bullish, so the other way of looking at this is to ensure that we begin to see more consistent dollar bullish developments that would confirm the larger picture.
The above definitely refers to the Europeans, although even USD/JPY broke above resistance and made some steady gains also. It ended with a correction lower, but I don’t see this as a new bearish trend – certainly not after breaking above 120.69. While trying to figure out the balance between EUR/USD and USD/JPY to see how EUR/JPY can often backfire, it is something to watch because the cross has seen a solid rally. There are also signs of momentum becoming a bit stretched on the upside, with the risk being for a reversal lower in the cross. Therefore, the relative impact of EUR/USD and USD/JPY is going to be important.
Meanwhile, all on its todd, AUD/USD extended its gains to the first major resistance and has drifted back lower. The depth is not something that can be known in advance, but I do see it refreshing its desire to try and breathe some air at higher altitude. Whether it makes such a direct move as the first is difficult to judge before it happens, but overall, we should see another rally.