I’m not quite sure where to start. Yesterday saw some significant breaks in one or two pairs while other pairs appear to still be caught in consolidation ranges. The extreme differences between the pairs tends to suggest that we need the market to find a central theme once again and this will require some swings to be seen today.
For a start, the push above 102.78 in USD/JPY was quite some rally and certainly needs a pullback and probably modestly deep but there is quite a range in which it can stall. This will be puzzle number one for today. That USD/JPY was so strong, it dragged EUR/JPY higher than I had expected but there’s every chance it will come tumbling down also. This is going to need a high degree of coordination, particularly that EUR/USD remains within a very volatile consolidation. I’m not sure we’ll see a break beyond the limits I have set today.
But then we have to contend with the loss of 1.2791 in GBP/USD that has sprung a much earlier break that has required a re-jig of the decline from the 1.3444 high. Having gone through that process I am really quite optimistic of my 2012 forecast… but that’s just a bit premature for now. There will certainly be both downside and upside swings as this progresses but now the larger puzzle is how it slots in with EUR/USD and USD/CHF. The latter pair has some room for consolidation now, having reached back above 0.9818…
Meanwhile, in the far bottom right of the globe, AUD/USD wriggled and jiggled and wormed its way lower. This process should continue but with some swings along the way so best to sell into recoveries.
I have a template for today but there are several potholes in the road that could be a little tricky. Trade smart.