The recovery we have seen was always going to be a tricky one. There were no easily identifiable limits although I hadn’t expected a particularly deep move. Looking at the Europeans in particular the past two days haven’t seen much of a move but more of a sideways range. I think we’ll see another blip higher in the dollar today but I’m not looking for a major rally today – or not until late in the day at the earliest. It just depends on whether the market has the energy and enthusiasm for a break.
This is reflected in the Aussie also – which actually saw the losses I had suggested. I think it can edge a bit lower but there’s a deeper correction coming at some point so take care. The energy in the Aussie is not as powerful as we have seen over the past year and therefore it’s likely to suffer setbacks in complex corrections and general lethargy in its development. However, while allowing for deep pullbacks, the outcome does appear lower.
The JPY pairs saw losses – a break below key support in USD/JPY triggering the decline. These losses actually look corrective. The only caveat I’ll add is that the lower degree development is really quite a mess and that tends to generate hidden issues that can spring surprises. It will be important to follow the expectations for the structures and if these vary too much then take care and make sure stop losses are in place.
With USD/JPY declining, it has extended the downside in EUR/JPY. It also has a bit of a messy structure but overall does look bearish – and a little complicated. Both 4-hour and hourly momentum remain bearish.