More Of The Same… Part III

It looks very much like classic corrective price action that keeps everyone second guessing how it will develop. What looked as if we should see another leg lower yesterday saw the dollar hit the initial projection targets but then, after testing the retracement levels, slipped through and signaled reversals. It does look very much like triangles developing across several of the currency pairs but these can produce a sting in the tail so there’s no sense in becoming too fixed with a view when corrective structures can morph at the blink of an eye.

However, after yesterday’s developments the underlying (stronger) argument is for the bearish dollar correction to extend further. With luck we’ll see the triangles play through and finally provide a break lower in the dollar. I then suggest exercising care. The correction in GBP/USD is already quite mature, although quite complicated by the lack of bearish divergences that normally accompany a reversal. Add to that the rush higher in AUD/USD that threatens to open a can of worms…

As long as we see the triangles complete and generate a break, the weight of argument favors dollar losses and thus I feel that today we should be focusing on identifying the pattern completions and what constitutes a break and therefore confirmation.

USD/JPY didn’t manage to recover quite as deep as expected and seems to have resumed the downside. That should extend a bit further but is moving in slow-motion so I’m not sure we should be expecting any thrill from this area. That is amplified by EUR/JPY that seems to be developing a triangle also that should, ideally, generate a break higher, probably carried on the back of EUR/USD.

Thus, more of the same still remains appropriate and being a correction, keep your wits about you and be aware of when patterns complete or break down, keep positions short within the time frame and take profits early.