Market Extending Its Consolidation

Goodness gracious the market seems to be extending its consolidation. We did see some downside progress in the dollar against the Europeans, but that hardly sustained. Its eyes still displaying signs of drowsiness. Indeed, this has become so slow there still remains the risk of a modest correction higher.

However, despite the stupor the underlying structure remains in place although it is a rather gnarled and pocked one. Probably it’s EUR/USD and USD/CHF that could still see these marginal new corrective dollar highs. GBP/USD seems to have eclipsed the other two with a somnambulistic range that could extend for a while longer. It wouldn’t surprise me to see this lead to the next drop in the dollar.

When I saw the losses seen overnight in the Aussie dollar I wondered whether we could revisit the recent corrective low. Indeed, price is closer to that than yesterday’s high so the risk is there. However, given the market is completely whacky right now I think we should keep our options open and also retain the expansion levels noted yesterday. I say that because I find the decline from yesterday’s high difficult to slot into an impulsive structure. Take care with this one.

Meanwhile my “wish” for USD/JPY is to push higher in order that it could reach its target and reverse quickly enough to prevent EUR/JPY breaking the 130.72 high failed miserably. The structure is a bit fractured, but yesterday’s high can still fit within a larger bearish outlook. The biggest issue here that needs attention is the balance between what should be, at some point, a higher EUR/USD and lower USD/JPY and how this impacts on the cross. We should be seeing losses in USD/JPY – it topped out perfectly and should continue to lose ground but we are approaching support areas where a correction can occur.

Therefore, while things remain in flux there does seem to be some high risk areas where the dollar should top out against the Europeans (assuming it gets there) and also areas that would suggest the decline is making a more direct move. Take note of those.