Dollar resistances broke in the Continental Europeans but not by too much. It has left me a tiny bit puzzled in determining whether we have seen a total Dollar reversal or not. Certainly it appears to have done so but will also imply that the Dollar Index has fallen significantly short of its downside target. I still can’t reconcile the bearish structure there and I could argue an ambiguity in EUR/USD. If I am to find a solution that implies EUR/USD has topped out then the run up to 1.3966 would require an unusually deep correction in a lower degree Wave (iv). However, if I look at Friday’s 1.3704 low as a current Wave (iv) it is actually less deep than the prior one. Having said that, it’s difficult to argue that USD/CHF appears to have broken higher. In addition, there is also a scenario that could see some recycling lower in the Dollar. Therefore, we have a few conflicts that require management.
Even in GBP/USD the outlook does seem to remain bullish, not by a huge margin at this point, but nevertheless it should imply another positive day and to a level that seems to suggest subsequent follow-through. Likewise, though often not correlated, AUD/USD still remains on a bullish track and I expect further highs today.
USD/JPY rallied to current levels a lot more directly than I had earlier expected and hauling EUR/JPY higher in the process. Friday’s low in the cross held above the key support that, if broken, would have sent it much lower. The rally was therefore in line with the recycling of which I had warned but shouldn’t make massive gains today.
Thus, as we start the week the Europeans still need some care and attention due to their rather ambiguous outlook. I would therefore suggest following USD/JPY in particular that could provide the best outcome.