Goodness gracious… What the heck provoked that?! By “that” I’m referring to the reaction in the Continental Europeans. By gad, can’t they keep control of themselves? Where’s the stiff upper lip? When the drop from 1.3432 began I had a target +/- 1.2744 or at a stretch 1.2708 - although that is quite a normal projection. Yes, as we’ve seen, both 4-hour and hourly momentum persisted in pointing lower – but to get to almost the 76.4% projection was never really on my mind. Having been waiting for these dollar highs to be finalised, the persistent strength has had a deleterious on confidence. That said, we do have some good hourly bearish divergences and – just about – 4-hour divergences also. I’m therefore hopeful that the yo-yo will rebound.
Even in GBP/USD I have been forced to accept an alternative, but one that implies a much firmer outcome. Even then, I can’t rule out some additional slippage in the meantime. Certainly the 4-hour momentum picture is indicating a strain in the downside but hourly momentum remains a little fragile. Therefore, this requires some care. This could well be the same story with the Aussie also that has recovered to the deeper retracement levels but still seems to have some downside risk…
USD/JPY behaved well and stalled in the right area. It is due a correction but probably not an excessive one. This leaves the balance in EUR/JPY a little touch and go. It obviously lost out courtesy of EUR/USD so the balance between a weaker USD/JPY and firmer EUR/USD will be important. Certainly, while I expect EUR/USD to make further gains, I’m not expecting significant strength but a correction lower. That places the cross in a rather volatile situation that makes it difficult to be certain of a definite outcome today.
The first half of the day should see Dollar weakness and followed by strength… a bit like a yo-yo really…