The depth of the dollar losses was always going to be an inexact process, although one or two currency pairs exceeded their expected limits. However, it wasn’t all dollar losses. While EUR/USD, GBP/USD and AUD/USD all gained, USD/JPY and USD/CHF saw dollar gains. In some ways, particularly in USD/CHF, it has tended to set the trend in advance compared to the other pairs. As for USD/JPY, it has become detached from the general dollar direction and it seems likely to continue to retain its independence.
So will we see more? From a totally objective view, it’s possible that the dollar could deepen its losses. However, I have my doubts. Looking at the general structures and what needs to happen in the larger picture – together with the limitations some of the pairs have in their individual development, I see the risk more on the dollar upside. However, it’s going to need Europe and North America to lead the way.
The deeper recovery in AUD/USD caught me out, and has led to a situation where I feel that we shall either see a very deep correction higher ... or… I have the wrong structure. I’ve been trying to work through the development to reconcile the issue, but there is some ambiguity, so it’ll be worth reducing position size to wait for a more definitive outcome.
The recovery in USD/JPY to 120.22 was much deeper than I had anticipated, and tends to point more to a corrective pattern rather than impulsive. Even then, it was a deep retracement that hit the normal extremes for a correction in this position, so there is still an impulsive argument, but we’ll have to watch for the impulsive projection – or lack of. The latter would then confirm a corrective pattern developing. That EUR/JPY appears to have little room on the topside suggests that the decline in both pairs should resume.