I’m not sure the term “Swing Trading” is quite apt. A more appropriate term is “Whip Trading.” I had not expected the sharp drop in the dollar – except in USD/JPY – but overall, I cannot change my overall outlook unless some other catalyst develops. So, we’re back to Square One. Even then, there are some puzzling conflicts which do deserve to be treated with care. In particular USD/JPY and EUR/USD both appear to be bearish - but this has been my underlying view of EUR/JPY.
So what should we expect today? There are two issues to resolve here. The first is to clarify the structure of the reversal higher in the dollar following its spike lower. The second is to judge how this fits into the higher fractal. How deep can any correction lower in the dollar develop? There does seem to be potential for further swings, probably not as drastic as Friday’s, but we have to oversee the development of foundation building for the next larger run. Currently, it’s not exactly crystal clear.
Perhaps one clue may be GBP/USD that seems to suggest that it wants to attempt new highs. It is required but the development here has made the charts look like a kid’s scribbles. It has been rather painful waiting for approaches to targets I’ve had for several weeks. However, I do think it will try again today. On the contrary, AUD/USD has a more bearish outlook – but does have potential for a correction higher, although not too deep but otherwise my underlying view remains.
So, it looks like a nervous start to the week, and with a relatively high degree of conflicts. Therefore, do take care because there is risk of some tight range trading to develop foundations for stronger moves.