All began relatively as expected over the past week – until the weakness in the U.S. dollar became more apparent. This has taken us back into the broad range of the past year – particularly in EUR/USD. As mentioned some while ago, this range – from the beginning of last year – has been the longest sideways ranging move I have ever seen for such a limited range in the daily charts. The outcome appears to suggest further volatility, more likely in the lower degree charts but still implying further swings before a trend can finally develop. Thus, we remain in a relatively restricted range, but I still look for an eventual breakout - though one that doesn’t have much room to maneuver…
As this week begins there appears to be some conflict between the major pairs. On the whole, there are dollar bullish divergences in the Continental Europeans, but alternatively GBP/USD has taken its own route to nowhere. The pound may well be seeing a triangle but I do have some reservations about the extremes of each leg. In terms of the larger picture the triangle does seem appropriate, but some care is still required.
The Aussie also made a new high and tends to suggest the same outcome as the Continental Europeans – still potentially holding in a corrective sequence and therefore implying the risk of complications.
As for the JPY pairs, I was struck by the development in EUR/JPY more than USD/JPY, the latter being pretty much perfect to the outcome I suggested a week ago. The only problem I have is the consolidation between March 30th and April 1st. This was a terrible mess and it's difficult to see how it slots into the larger structure. However, the gains in EUR/JPY were more than expected and tend to suggest strength. These two are worthy of attention in terms of a more direct move. What we need is a stronger directional signal…
A cautious start to the week. Hopefully we’ll see a resolution soon…