Yesterday was a strange day. The consolidation part was right but otherwise very little moved with much intent. Having said that I do feel that the JPY pairs could well provide the stronger move that I had anticipated yesterday.
I’ll cover the JPY pairs first as I feel this has a stronger basis. Yesterday’s early follow through higher in USD/JPY looked promising but the rally couldn’t sustain itself to lapse into a sideways trading range. However, this seems to be close to completion and as long as it breaks higher the impact could be quite strong. Ideally it should be higher as it needs to drag EUR/JPY up behind. This does look critical for the cross to complete the rally to target. On this front it is touch and go because of the potential weakness in EUR/USD. Thus, this does appear down to timing of respective reactions in both USD/JPY and EUR/USD, the latter also appearing to be poised to break lower. Thus, watch for USD/JPY to make its move first and note the key projections that will provoke a make or break situation in the cross.
EUR/USD itself looked as if it had broken lower only to recycle higher. This looks complete and therefore once the rug is pulled away from beneath its feet the risk is for losses. Just how quickly the decline comes is perhaps more the key. The same can be said of GBP/USD that made a very strange sideways consolidation. I remain bearish there but not as strongly as EUR/USD.
While the EUR/USD and GBP/USD had there own sweet way of doing things yesterday, so did USD/CHF… but in a different way. While the other two had down-up days USD/CHF maintained its uptrend. However, what I do notice is that this correction still has to deepen and possibly in sideways consolidation. Therefore it does still need to be considered de-linked for now…
AUD/USD failed to dip and corrected higher. However, I cautiously remain more bearish than bullish and would much prefer to suggest that the target I highlighted yesterday may well be possible today.
Given the risk further consolidation in the Europeans I’d suggest looking more at USD/JPY today and possibly EUR/JPY.