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As expected, the market had no appetite for pressing the Dollar downside (against the Europeans) on Thursday. The first half of the day generated a stifling sideways consolidation, before finally seeing a slight extension lower. The EUR/USD and USD/CHF in particular, saw the dollar push marginally below the hourly Price Equilibrium Clouds to test the still rising 4-hour Clouds. The result was to knock the Dollar back higher but to retest the hourly Clouds, a classic development on a reversal. With the 4-hour Clouds still rising (in dollar terms), we should find the Asian session relatively quiet again but by European and North American trading the risk will be a break lower in the Dollar.
The GBP/USD is rallying in quite a choppy way, and more in line with a corrective structure as expected. This does seem to be developing in a manner that could generate a larger sideways consolidation rather than a complete correction. This is probably the likely result given the conflict with the other Europeans. It suggests that the Pound needs to react more strongly when the Euro makes its own corrections. However, I think the point is that we’re going to need to use kid gloves when dealing with the pound.
Meanwhile, the Aussie proved me wrong and edged a little lower. I have (unfortunately retrospectively) noted an alternative count that actually caught yesterday’s low and the potential for a double bottom. The target is close to the retracement area for a pullback. Thus, we have a decent structure to follow – breaks in either direction provoking extension.
The JPY currencies didn’t get very far. I had expected a new low in USD/JPY but not as brief as we saw. However, the puzzle yesterday was how the EUR/JPY was supposed to move higher while the USD/JPY made that additional low. It managed that extremely well and this should mean that both can make further upside progress, potentially now with the EUR/JPY being the stronger of the two. The target set last week for the next turning point in the USD/JPY remains the same (there is a higher target though not preferred) but note the reaction from that target should be quite robust.
The GBP/USD is rallying in quite a choppy way, and more in line with a corrective structure as expected. This does seem to be developing in a manner that could generate a larger sideways consolidation rather than a complete correction. This is probably the likely result given the conflict with the other Europeans. It suggests that the Pound needs to react more strongly when the Euro makes its own corrections. However, I think the point is that we’re going to need to use kid gloves when dealing with the pound.
Meanwhile, the Aussie proved me wrong and edged a little lower. I have (unfortunately retrospectively) noted an alternative count that actually caught yesterday’s low and the potential for a double bottom. The target is close to the retracement area for a pullback. Thus, we have a decent structure to follow – breaks in either direction provoking extension.
The JPY currencies didn’t get very far. I had expected a new low in USD/JPY but not as brief as we saw. However, the puzzle yesterday was how the EUR/JPY was supposed to move higher while the USD/JPY made that additional low. It managed that extremely well and this should mean that both can make further upside progress, potentially now with the EUR/JPY being the stronger of the two. The target set last week for the next turning point in the USD/JPY remains the same (there is a higher target though not preferred) but note the reaction from that target should be quite robust.