Dollar's Bearish Preference Returns, At Least In Europeans

The depth of the corrections in the EUR/USD and USD/CHF did provide me with a minor shock over the past two sessions, but as the day wore no yesterday and I looked around the pairs I began to settle. The risk of losses in the AUD/USD also added to a rise in doubts about the dollar bearish outcome I have been expecting but yesterday showed that the Aussie can do really well in taking an independent route compared to the rest of the market.

So we’re back to the dollar bearish preference – at least in the Europeans. The question is whether this develops directly or whether we can see further strength in the dollar, even if to minor new highs, before the losses continue. There is an early risk but I don’t see a significant one and that’s down to GBP/USD that also led with a stiff British upper lip and made further upside progress following the deep correction. Yes, a minor correction is still possible, particularly as we move into the Asian session but overall this does look bullish. Therefore I do expect EUR/USD and USD/CHF to follow suit.

The Aussie collapsed but the move doesn’t look complete. A correction is due but not too deep so look for further losses, not as deep as yesterday but still for a correction only.

Now what did surprise was USD/JPY. While I have held a bullish preference I had got bogged down in the rather messy structure. Yesterday’s rally was actually in line with last week’s more medium term forecast. It still has some way to go but approaching areas where we’ll need to allow for slightly firmer corrections. As mentioned yesterday, EUR/JPY should have significant input into this although I do still find the balance between the three rather difficult to envisage in terms of satisfying individual expectations versus the needs in the cross. I suspect a pretty choppy development over the coming days.

So the basic outlooks do seem to have solid foundations. There’s still risk of minor twists and turns but overall I feel quite comfortable with the basic views I have been suggesting.