Possible Complications

The Dollar didn’t exactly cover itself in bullish glory yesterday. For most of the day it made hard work of a laborious consolidation that, although much in line with expectations, finally broke lower and tested the limits of the preferred upside. We did see a new high In the GBP/USD, but still within the next higher projection range. So right now we’re hanging on a thread between further Dollar gains or a drop to lower targets. I have to say that, just scanning through the charts the downside risk does seem quite convincing, but I’d still prefer to look for stronger indications. For a start, one possible conflict is the extent of implied follow-through in the Contintentals versus the GBP/USD. It is definitely worth approaching this with some caution.

The Aussie spent the day slipping gradually lower. It has potential to go further, but the structure is still at a stage where it can be interpreted in two ways. We have no impulsive targets having been met and, indeed, are still some way from achieving this. At this point we can only follow what happens, although currently both 4-hour and hourly momentum are pointing lower and the onus is still on the downside. We now only need impulsive targets to be met. Until then make note of where the bearish structure breaks down.

The JPY currencies spent an equally quiet day, as did the Europeans. The USD/JPY bullish structure is being stretched, although the EUR/JPY is very much within the trading range I had expected. We clearly need a stronger catalyst to provide any significant follow-through. I doubt this will happen in EUR/JPY, and perhaps that implies continued slow development in the underlying pairs.

We still have an unsatisfactory status quo across all pairs, and a definite need for caution until we see a firmer and more decisive break.