Escaping The Drop Into Hell?

Well, that was a day and a half. Just as it looked like EUR/USD was being drawn into the gates of hell, it rose like a baby phoenix from the flames. It’s looking positive but hasn’t actually confirmed that it’s going to new highs. Indeed, there are a couple of scenarios to observe, one being a sideways consolidation and the other a stronger follow-through to new highs. Well, perhaps I should add the possibility of the recovery being just a correction to allow it to plummet into the fiery depths. With three scenarios it’s hardly the easiest market to pick. However, there will be pointers along the way. Each scenario will require certain points to hold or break and through this process the eventual outcome will become clear. Thus, watch those key areas to adapt and adjust.

The strength in GBP/USD has surprised. I still find the decline from 1.5268 to 1.4951 impossible to see as a 3-wave move but just as I wrote that, I realised there was one alternative I hadn’t considered – and one that worked perfectly – but which does suggest we have seen the final low. Currently the rally should continue although I suspect it will become more choppy before too long.

AUD/USD decided to take a break from the rapid rush higher seen on Tuesday. It has some options and we’ll need to take heed of key levels. This correction has a range of retracement levels that could absorb a deeper move higher. However, wait for that break just in case it takes the sideways consolidation route.

USD/JPY has become bogged down in its own consolidation. There is risk of this extending but within the position it is currently resting, there are some conflicts in terms of the continuing confusion over the strange case of the missing bar on Monday. Unfortunately, this still means we need to take care but for today I am rather reluctant to suggest any significant moves. Needless to say, the recovery in EURJPY was encouraging, but here too, I am having to work with scenarios and looking for the next move to provide the information that would make or break the two scenarios. Thus, do take care even in the cross today…