I have no idea what Yellen said, but what developed yesterday followed the broad overview of what I had expected. This is one step closer to the Xmas present I suggested yesterday and now we need judge the next step. However, this could be a little complicated because of the general template of the market prior to NFP that generates a cautious run into the last third of the last day of the week. Therefore, I’m not totally sure of how the next move will develop but we have to accept the risk of some complex corrective patterns on the way.
Having said that yesterday followed the broad overview, there was a significant outlier in USD/CHF that plunged on Yellen’s comments (I assume) and to levels I had not expected. This little beastie has provided me with a more complicated outlook. It certainly doesn’t change my overall view but more that it may imply a minor misjudgement somewhere along the line. Therefore, I’d much prefer to see how the next move develops to work out how this fits into the larger picture.
EUR/USD and GBP/USD appear to have clearer pictures and are probably the better conduits.
The Aussie was a little tricky but has dipped – but from a lower target than I had expected. It appears to now have clear upside and downside break levels. Keep the levels I provide in mind and act accordingly…
As for USD/JPY… The continued refusal to make any headway lower is tending to suggest that the 48-week cycle low has been a dud and implies strength. The only problem is that the structure is rather haphazard and so far I have not been able to identify a valid structural development. I certainly wouldn’t fight any breaks of key highs but I’ll wait for a clear break. Until then there could still be chance of sideways movement. How this will impact on EUR/JPY is therefore also uncertain – but then it should be EUR/USD that drives the cross… Take cues from that…