New Highs For The Dollar, But For How Long?

I began the day thinking that, perhaps, we’d see a new high in the Dollar with classic Dollar bearish divergences and all would be well with the world. Well yes, we did see a new high, stretching to higher projection targets but did those bearish divergences solidify. Oh no… Well, the 4-hour are “sort-of” intact but not as convincing as two days ago while the hourly bearish divergences disappeared into the ether. Time to scratch my head and make sense out of this. Certainly, I don’t want to put my neck on the line at this stage without clear-cut reversal indications. There have been instances where the hourly divergence just fails. However, I’m not going to rely on that which will mean some hard work ahead in terms of confirming any reversal.

While the above applies specifically to EURUSD and USDCHF, its European adjunct, GBPUSD has not met its downside target yet. This may well be a clue for the Continentals. Once GBPUSD completes this next leg it will be due a correction higher. This is somewhat similar to its Commonwealth partner, AUDUSD that broke supports to confirm direct losses. This Antipodean is in a similar position but probably in a more advanced fractal than GBPUSD. Even then, I suspect these two could develop in similar ways.

USDJPY… oh… I had been patient in attempting to ensure that we’d get the high I had been expecting but just like the Continental Europeans, as this target was approached both 4-hour & hourly momentum abruptly turned up and stood aside to allow price to burst higher. It turns out that in one area (101.93) that was particularly complicated there was a 14.6% retracement… that was it… Hence the rush higher came out of the blue, except for the lack of divergences, and confirms the 24 and 48-week cycle lows that I pointed out 3 weeks ago… Right now we should be seeing a correction before it extends its rally.

Clearly EURJPY was propelled into orbit on the back of USDJPY. This has tended to confuse my expectations for the cross although in the current moves it does still look bullish. For now I’ll rest with that and note the individual development of EURUSD and USDJPY to judge how the cross will fair. A correction lower does appear to be required but like USDJPY it should move higher…