Completing Corrections?

Broadly, the basic outlook for a corrective day yesterday has worked out well. Of course, the biggest problem in the majority of corrections is just how deep they will dig – and that is what faces us today. Already we have seen AUD/USD continue its losses and the recovery in EUR/JPY was quite encouraging. However, across the board there is room for some sneakiness that will not only need some attention but understanding where stop losses should be placed.

From the Europeans, the development in GBP/USD has been the most unusual, the normal structures that tend to develop failing in turn. It has ended up either as an extremely unusual irregular hybrid or there could be an alternative that I had considered, but find it rather incongruous. For the Continentals there appears to be straightforward choice of resuming Dollar gains after this move – or we’ll see another set of corrective waves before the Dollar gains.

Of all, perhaps AUD/USD performed the best, finding a corrective high and followed by deeper losses. The directness of the decline from the 0.8700 high has made it a little difficult to be certain of having identified the right structure but does look as if it should continue to see losses, but more likely in a less direct manner and more frequent corrections.

Finally, the puzzle in USD/JPY & EUR/JPY may well have been solved. Certainly, both reversed higher and look good. Still, there is an element of uncertainty but given the market’s general reluctance to hold any short positions – no doubt provoked by the plethora of calls for a major reversal lower just a few weeks ago – we should still remain alert for signs of a confirmed extension on the upside. Indeed, as mentioned yesterday, EURJPY was facing a critical support which has held. Therefore, focus more on upside development. However, perhaps this won’t develop in such a frenetic manner as before.

Best vehicle? Potentially USD/JPY and followed by EUR/USD if the downside is confirmed…