Friday saw the Continental Europeans behaving pretty much as I had looked for. We should now see a temporary lull, a pause for reflection, before renewing the market’s apparent preference for a weaker dollar. I suspect this process will take over half the day – maybe the while day depending on whether the weekend has taken any toll on enthusiasm. On the other hand, just adding in the pound, it could barely muster enough energy to press higher and spent most of the day dithering over what should happen. At that high there was a solid bearish divergence but the pullback lower hasn’t really caused any significant damage in terms of a reversal lower. Currently, it’s a tight call but Friday’s range will probably provide the break – whichever direction it will be…
I had looked for a pullback in the Aussie on Friday, mostly down to the 4-hour Price Equilibrium Cloud bearing down on price. However, it did manage to poke its head just above the Cloud before running out of enthusiasm to see the losses I had looked for. Now it needs to make a definite statement for it’s next move. The 4-hour Price Equilibrium Cloud is now moving sideways, offering the chance to extend the move back higher – but will it take up that opportunity?
And finally, for my JPY chums, I was once again surprised by further losses following last Tuesday’s bungee jump, only the rubber appears to have been an old one that has lost its elasticity. These exceptionally sharp losses, with the limited correction in the first drop, are the worst of all markets to forecast, generating excessive projection targets that are just out of the ordinary. While it slowed in the latter half of last week, both 4-hour and hourly momentum remain steadfastly bearish. This tends to suggest that we’ve seen a shallow correction and follow-through. Now the task is to work out which of the blips and burps have provided the key wave counts…
In EUR/JPY, we have the same shroud of the unknown in terms of the almost non-existent correction right at the starting point of this decline. 4-hour momentum remains bearish while hourly momentum does still allow further weakness. Also, it managed to reach a new daily low in the entire move down from 141.05 – just about 11 months ago. The balance between USD/JPY and EUR/USD is going to be crucial now and may provide us with some information…