Outlook Clearer: Downside Reigns in EUR/USD

Well, well… the EURUSD support … didn’t. That implies the recycling will not happen and therefore the downside reigns. This is now consistent across the 4 majors and we can tag on the Aussie also. The immediate resumption of the downside (in EURUSD) implies that we had a paltry 14.6% retracement. That was 3 months of a decline and 2 days correction. It’s hardly surprising I was caught out by that shifty correction. I have seen it before, actually several times although those were in the U.S. equity markets.

So I spent 4 hours crawling over the charts doing the analysis. I know my downside target in EURUSD already – that’s a straightforward natural target that tends to be very consistent. Now, it’s a matter of identifying the internal structure. Dollar gains should be seen against the Europeans in general but I think we’re towards the ending stages of this particular rally. Thus, don’t expect yesterday’s drastic losses to be repeated.

AUDUSD has extended losses and this should provide further downside over today. The targets I have been targeting for a while do seem to still be on track. We’ll have to be certain of the intermediate targets in case the higher degree projections stretch a little lower.

USDJPY soared like a bird also and I still think there’s more to go. This is shaping up nicely with the help of the maturing bullish cycles. The corrections earlier in the sequence don’t appear to suggest being particularly deep as we move towards the latter half of the rally so this should basically remain quite a decent looking rally. However, note that the immediate correction could last for a while in a possible consolidation. It has dragged EURJPY up with it and while there is risk of a slightly deeper pullback, overall this should continue to make gains. The only possible snag is a period of consolidation.