My, my, this morning’s analysis was a tough one. Too many mini-minor ragged swings that made life difficult to catch the ratios. In these instances, it is better to identify a valid 5-wave move and then work around these to see how the prior and latter development fits into the picture. On top of that, these lower degree waves need to work with the higher degree waves – and so many with difficult, noisy moves. I have a preference – but a cautious one – and needs some breaks to confirm one direction – or the opposite. Having said that, the dollar downside appears limited – but that could have serious consequences. Thus, we are walking on a tightrope and it’s best to know where these breaks lie.
I’m also seeing the dying embers of the recovery in EUR/JPY. It does still have a way to go – not in terms of movement but more of the final two legs of the rally from 112.61. This tends to suggest that we’ll see two-way trading and broadly balanced between USD/JPY and EUR/USD – but of course allowing for the swings that need to complete the rally in the cross. Initially, that doesn’t really give us much of a clue for the two intrinsic pairs expect that they seem to have a general correlation without excessive deviance levels.
Thus, we should generally see steady moves in all dollar-currency pairs. This also includes the Aussie, which has seen its energy levels reduce dramatically over the past year, but at some points we may well see some divergence between the Europeans and JPY versus the boomerang currency.
Today should start as normal – very quiet – that should set up the market for a stronger move. Well, perhaps that’s a bit too early because we’ll need some foundation waves to develop – and which may well end up seeing a generally quiet week as we move into the Non Farm Payrolls on Friday.
Basically, expect limited ranges for now and wait for the signs of a breakout…