There I was on Friday morning, watching the completion of a 5-wave move in USD/JPY, EUR/USD and USD/CHF, all accompanied by hourly (dollar) bullish divergences and thought: “great, this should generate a correction” – and it did. USD/JPY 14.6%, EUR/USD 7% and USD/CHF managed a massive 23.6%. So the quiet end to the week became a frenzy of imbibing uppers that extended the dollar decline…
So what have we got as this week starts? Well, follow-through, but I’m not sure it’s going to be a repeat of Friday. We are approaching important dollar support – more a buffer area that should be challenged – and just how the market reacts is going to be important. Special attention should be paid to momentum – particularly around the 1.1436 high in EUR/USD and approaching 120.41 in USD/JPY. In USD/CHF, this buffer area is less clear and as such, it’ll be best to match momentum indications while approaching the levels mentioned above in EUR/USD and USD/JPY.
As for GBP/USD… well, what can I say? It has stopped even trying. The entire recovery from the 1.5329 low has been a complete mess and needs a catalyst. It’s probably still not time to make any decision about this chappie and better to wait for the outcome of the Continental Europeans and USD/JPY.
The Aussie started off well, but then caught a cold. It has made the outlook appear less certain, and therefore, needs more attention. It is currently in no-man’s land, with potential on either side of the market, but with the added risk of whipsaws. This needs further development to clarify the outcome.
That just leaves EUR/JPY that flattered to deceive. Considering the general correlation within the dollar-currency pairs, it’s difficult to judge the outcome. I have had my view, but it's been coming up short. I’d rather treat this with caution also.