There were some tricky problems to overcome yesterday. Some of these were in areas where I could see some ambiguity, but there were other – quite surprising – outcomes. Such has been the complexity of lower degree noise that made me cautious on one hand, but also those that I had just not envisaged.
As a base to work from, the Continental Europeans continued their basic sideways move – although USD/CHF made a new low. These two have been relatively consistent but the long sideways range was quite frustrating. However, it should now follow the outcome that I have indicated should develop for the past two days.
The other European, GBP/USD, was the shocker. The break below 1.4052 made my jaw gape. This is a game changer, but also generates a more complicated outcome. Of course, it can make its own way without following the Continentals, but the structure does permit a wide range of pullbacks and projections. This is going to be a little bit tricky not knowing where there will be correlation or divergence, and is best considered as an independent pair for now. Certainly the structure is a tiny bit difficult, and that’s the main issue in terms of retracement versus projections…
The Aussie pulled back above my retracement level. It has been roughly correlating with EUR/USD but has its independent moments. The outcome appears to be that we have seen a correction rather than an impulsive decline, and that suggests further upside. I tend to feel that this could imply more correlation with GBP/USD rather than EUR/USD for now…
Finally, the JPY pairs… Well, the lack of any pullback higher is pulling me away from the original view, mainly because of the already sizeable decline in one area. I note a strong hourly bullish divergence – even daily also – but still negative momentum in the 4-hour chart. I think it will be best to allow the market to lay down a pointer today. The fact that EUR/JPY extended losses and is not really contributing any strong information doesn’t help either, but it does suggest that the cross is still basically bearish – but it may not be so today. More likely, I feel there is a risk of a sideways move in the cross.