Well, that was a strange day and I can’t say that I caught much of that. In the process it has raised more complications and a general disconnect between the various currency pairs. Examples are the basic sideways move in the Continental Europeans versus GBP/USD, the additional decline in GBP/USD that breaks the triangle I had considered, sharp losses in USD/JPY and also losses in AUD/USD. Yesterday’s title was “diverging indications” but I had expected the extremes to be so whacky – and the risk does appear to be for more of the same.
For now, the Continental Europeans look like extending their general sideways move but should pull out of their trance by European/U.S. trading, and at that time I suspect the follow-through I have been suggesting for the past two days. GBP/USD … well, I’d prefer higher, although I can’t see any strong indications and it would therefore be best to wait for confirmation.
AUD/USD finally managed to see the losses I had expected. There is an hourly bullish divergence but 4-hour momentum is still pointing lower. This suggests a correction only and for losses to resume.
On to the JPY pairs. I began the day considering a potential reversal higher, but it became clear on the break of the low that a more bearish outcome was inevitable. Indeed, it managed another sharp decline. Like the Aussie, it has an hourly bullish divergence but with 4-hour momentum still sniffing the bearish trail. I suspect a slightly deeper correction – rather than shallow – but best look for reversal indications rather than riding any correction. This should drag EUR/JPY along with its more important brother…
There are still some tricky confusions around. Take care.