Underlying Dollar Uptrend To Continue

I underestimated the degree of follow through on Friday. Even the USD/JPY managed to edge higher. Well, Dollar strength is the underlying influence and I can’t see that changing for a while yet. In addition, it’s the depth of corrections that we'll probably see that will provide the ability to judge any additions to long positions. Conveniently, at this stage of the rally, the area of the corrections become somewhat more straight forward due to the fact we are in a series of Wave iv’s of varying wave degrees. Given they are related to the Wave ii, it provides a fairly reliable window of retracement. There is just one deeper correction to come but we haven’t quite reached that point yet. This will provide the opportunity for USDCHF to see a deeper correction as well – something that is needed in its own unique structure, quite differently to the EUR/USD and GBP/USD.

Thus, while we should have minor follow-through today do keep in mind target areas and the anticipated depth of corrections over the next day or two.

The Aussie… hmmm… that has seen a deep reversal and is messing with momentum just a tad too much for my comfort. We had a confluence of daily, 4-hour and hourly bullish divergences, but Friday’s losses have put the intraday divergences under considerable pressure. I would recommend exercising some care with this cobber. Maybe we need to allow for a little lower.

Then the JPY pairs… just won’t give up on the rally. However, the EUR/JPY is giving the impression we are seeing a recycling, thus the upside should be fairly limited. The USD/JPY does have further room on the upside into which it can move, but it is due a modestly firm correction. The balance between the USD/JPY and the anticipated losses in the EUR/USD should see the cross turn back lower before the USD/JPY.

Continue to buy on (Dollar) dips in the Europeans. Be more cautious about the JPY pairs although EURJPY does appear to have a fairly well defined stalling point.