I wasn’t really too happy about the second half of last week. I did see the alternative deeper losses in the dollar but felt the dollar index and USD/CHF in particular didn’t really fit into the larger scheme of things. So I have a puzzle to solve in terms of the dollar index. However, in combination with Friday’s report and the mini-weekend update, it does appear expectations have developed well. There are a couple of question marks from this point and having to restart the foundation waves once again, there could still be potential complications – particularly in USD/CHF and GBP/USD that will need some close attention.
Added to that, AUD/USD has extended its gains and that triggers a larger adjustment in the daily structure. There are vague suggestions of a high but just “vague” at this point. This tends to suggest that, comparing the situation in the Europeans could lead to some spiky development over the next day or three. It does look more likely that we’ll see further highs in the Aussie. The slight problem is that the rally has been so direct that there is a mild risk of misjudgement, but this may be solved by observing for alternation.
When I also look at EUR/JPY, its rally has been strong and has also seen momentum remain firm. Here the question is whether we need a deeper correction to satisfy alternation and then find a new high – or whether we’ll see losses despite the lack of bearish divergences… USD/JPY doesn’t provide too much information, although it does suggest further gains. How quickly these gains develop and comparing to how EUR/USD could still provide some initial swings, produces its own puzzle to solve.
Overall, the current position of the market still appears somewhat erratic and requires care. Once this is solved, we should see a more directional bias.