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Conflicting Indications Emerge

Published 05/21/2015, 12:43 AM
Updated 07/09/2023, 06:31 AM

Yesterday’s developments were predominantly as expected with precise hits in EUR/USD, USD/CHF and EUR/JPY while close in AUD/USD. It was just GBP/USD and USD/JPY that were a little off track. Just focusing on the Continental Europeans, we now have a face-off between dollar hourly bearish divergences and the dollar supportive 4-hour Price Equilibrium Clouds. I should note, to add to the conflict, is the generally bearish 4-hour momentum. This will be the main source of conflict with the solution being patience, waiting for key breaks.

GBP/USD failed to make new lows and recovered sufficiently enough to suggest that Tuesday’s low was an intermediate low and tends to suggest that there should be another new low. The slight snag is in knowing where the current correction will stall. There is also a risk of a minor lack of correlation between GBP/USD and the Continentals – which may not be an issue but does tend to complicated things a bit. Therefore, please be alert to the individual risks.

Compared to the past few months, AUD/USD has begun to see the pace of its decline slow down. It’s not really a problem except a dash of impatience. There is a firm hourly bullish divergence but a weak 4-hour divergence. This tends to sway the expectation to a period of consolidation/correction but still with the general underlying bearish outlook.

To cover the JPY pairs, I’ll cover EUR/JPY first because that developed within the boundaries of the correction I had suggested. Is it complete? Maybe… but in terms of depth there are still potential deeper retracements but within a move lower. Which will force it lower? EUR/USD or USD/JPY? Well, it’s not quite so simple. USD/JPY has potential to make a new high but keep an eye on the back door. The rally we have seen has some ambiguities in the final stages so take care.

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