What a mess…

Goodness gracious… That was a mixed up reaction across the board. EURUSD made some modest gains, USDCHF couldn’t be bothered and GBPUSD failed to recycle and slumped lower. AUSDUSD attempted to resume the downside but kept getting prodded higher. EURJPY seemed to love lounging around the area of Monday’s gap lower and USDJPY seems to have altitude sickness at these dizzy heights.

Obviously I look for structure and for appropriate ratios to be present for each segment of development. Even that was pretty tough in much of yesterday’s moves that looked more like someone cleaning the PC monitor and accidently rearranging the bars.

So we’re left with some rather vague structures that seem more corrective in nature but with the added challenge of slotting these into the larger fractals. I do still feel that the Dollar bearish correction is not yet complete. This seems to be strongly implied in EURUSD. I can probably add GBPUSD to that following a slight adjustment in perception yesterday following the upside failure. Even then it’s not a structure that has great clarity but seems to fit in better with the larger fractal targets. That just leaves USDCHF doing its own thing and needs to develop some clarity in its next move and to fall in line with the other two Europeans.

The Aussie corrected higher more deeply than expected. I can still absorb the deeper pullback although it’s approaching its limits. Ideally this should soon extend losses.

As for the JPY pairs… whew… they’re quite a mess in the short term development. In particular EURJPY was stronger than expected, not excessively, but for its position does raise some questions over whether it’ll resume losses or actually make a new high. I’ll not rule it out but it’s not one I’d like to touch at this point. This pair, when it gets complex, is a bit like a long piece of string that has dropped and become entangled. I’d suggest waiting for more clarity.

USDJPY failed on the downside and recovered but not enough to break above Monday’s corrective high at 102.91. This one should also be approached with care as this sideways consolidation seems to suggest a sharp break and obviously that could be in either direction. My preference remains lower but the large consolidation over the past month does have potential to skew the ratios in the terminal stages of this rally. Thus, best be sure of the move before raising risk…

Good trading

Ian Copsey  

WEEKLY OUTLOOK FOR THE DOLLAR INDEX

HOURLY CHART

21st May:

I have had to concede that the more complicated sideways move is unlikely now. As things have developed I have had to change the count as shown above and this tends to fit in well with the lasrger wave degrees. 

Thus, we should now see the 23.6% - 33.3% retracement in Wave (iv) hold between 83.49 - 70 and for gains in Wave (v) that should reach the 223.6% projection in Wave -iii- at 85.31 at least. Take care in case this turns out to be a firmer Wave (v) and reach the 238.2% projection in Wave -iii- at 85.73. 

We should then see the correction lower in Wave -iv- ...

RATIO TABLE

Good trading
Ian Copsey

Still some Dollar losses to come

Most of yesterday was taken up in resolving my technical problems and organizing a more robust contingency plan. There are still a few things to be ironed out but overall I’m back with a fully functioning charting program again thankfully…

While “lucky” enough to have performed the analysis on Sunday the in ability to see my charts with counts made writing yesterdays report somewhat of a challenge. There were a few niggling conflicts between the Europeans but these seem to have been ironed out with the Dollar losing out yesterday quite uniformly across the Europeans and Aussie. The message for today is quite simple. Basically we should see more of the same. The interesting thing about the Europeans in particular is that GBPUSD is in a slightly different position compared to the Continentals. That’s basically a good sign in many respects as the corrective limit in GBPUSD is very clearly definable and hence could/should provide guidance for the other two.

Do remember that overall the basic underlying outlook still implies an underlying Dollar rally…

Following the rather forceful manner of the early trading in the JPY pairs both settled down, perhaps more cowering and fearful of another whipping. There is a mixed outlook in USDJPY so break levels will need to be noted that, along with a more two-way movement today in the Europeans, seems to risk further erratic trading in EURJPY. The way things have developed it does look as if the cross came to a final halt at 132.76 and it’s hard to imagine it climbing to new highs.

Thus, if wanting to look at JPY then the vehicle must be USDJPY that has a much clear outlook. Probably that provides the better directional trade today although identifying the Dollar lows against the Europeans should offer a good entry for more a more sustainable directional move.

Good trading

Ian Copsey  

Game changer

Friday certainly sprung a surprise. The loss of 1.2842 EURUSD could almost be acceptable but that USDCHF pushed above 0.9747 was not… I had considered this alternative a few weeks ago but ruled it out as it generates an anomaly between the two Continentals in that USDCHF should now break above 0.9771 but I can’t see EURUSD breaking below 1.2042. Still, that’s something we’re going to have to work with. If nothing else, it does resolve the issue with GBPUSD becoming detached with the Continentals…

Having made that statement, I’m not totally certain that we should be going out and buying Dollars at this point. There does seem to be a risk of a pullback and potentially even a recycling that seems to apply to all three. It would seem to be a better approach to look for the outer boundaries of this possible range trading to identify the better trade entry areas. In addition, it’ll be worth noting the development that’s expected from each side to ensure that breaks are made and the sequence of development is followed.

However, by the end of the week it should imply a higher Dollar all round… against the Europeans and actually against the Aussie also. The latter has broken my long held outlook and does seem to be forging a similar development to the Europeans.

I add that last caveat because of USDJPY. I have for the past week been identifying the 103.31 target for the past week or so. Late trading on Friday achieved that target and we’ve seen the drop on open. I do not think that Friday’s 103.30 high was the final high in the rally from 75.57. However, we should be seeing quite a deep pullback and because of the huge triangle it does give rise to some slight deviation from the normal ideal correction. Furthermore, once the correction is complete there is a risk of quite a choppy swinging rally. Thus drop and pullback while I have been writing this outlook does appear to be a warning of things to come…

That will raise questions for EURJPY but does begin to suggest to me that we may have seen the final high at 132.76. It’s certainly around the right area looking at the weekly chart. However, it does raise the prospect of some pretty erratic trading.

Best exercise patience today and wait for the European boundaries. USDJPY may well be best left as there are several options open to it following this morning’s gyrations that risk a period of consolidation.

Have a profitable week

Ian Copsey  

DAILY FORECAST FOR USDCHF

BIAS: I look for losses to develop more strongly now - potentially to the 0.9450 area

Resistance:	0.9658-66	0.9682-90	0.9707	0.9720
Support:	0.9628	0.9597	0.9577	0.9545-55

MAIN ANALYSIS: Yesterday's saw an irregular correction that recycled back to 0.9708 from where it extended losses into the advised 0.9562-94 area from where we have seen the correction. It looks potentially complete but we'll need to allow for a little more to 0.9666-90 (at a real extreme 0.9720 but I think this would be pushing EURUSD a bit too far.) Overall at this point we should be looking for signs of the downtrend resuming back to 0.9597 and then breaking below yesterday's 0.9577 low to extend more firmly lower to 0.9520-45 minimum but I feel more likely towards 0.9435-50. Once below 0.9520 we should be looking for bullish reversal indications for a correction higher.

COUNTER ANALYSIS: Only above 0.9720 and 0.9747 would surprise and suggest extension to 0.9769 projection at least and I feel it could go further noting the 0.9800-10 area. Also note the 0.9860-75 area.

MEDIUM TERM ANALYSIS:

17th May:  We seem to have seen the base structure for the rest to follow. Right now we have to confirm the corrective high in the current pullback to be able to identify the next targetthat should reach the 0.9435-70 area.

Only a break above 0.9747 and 0.9860-75 will risk a retest of the 0.9971 high.

Good trading

Ian Copsey

Second steps

As expected the market had no appetite for pressing the Dollar downside (against the Europeans) yesterday, the first half of the day generating a stifling sideways consolidation before finally seeing a slight extension lower. Particularly in EURUSD and USDCHF this 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.

GBPUSD 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 which 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 with 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 USDJPY but not as brief as we saw. However, the puzzle yesterday was how EURJPY was to move higher while USDJPY made that additional low. It managed that extremely well and this should mean that both can make further upside progress, potentially now with EURJPY the stronger of the two. The target set last week for the next turning point in USDJPY remains the same (there is a higher target though not preferred) but note the reaction from that target should be quite robust.

So overall today we should see the Europeans quieter earlier in the day but look for stronger moves in the second half. We should also see the JPY pairs rising and watch EURJPY as the potential stronger gainer.

Have a great weekend

Ian Copsey  

TECHNICAL INDICATIONS FROM 15th MAY

As usual, here are a few more observations from yesterday's developments. The charts display the day's support and resistance from the daily report issued around 2am-3am GMT and last for the rest of the day. 

Comments provide examples of integrating technical indicators and the implications. We seem to be seeing some indications of short term reversals at least.

These indicators and daily support and resistance are available free of charge on the fast and responsive WorldWideMarkets MT4 platform. Contact me for more details or sign up here. (Offer applies to non-U.S. residents.)

USDJPY

EURUSD

USDCHF

GBPUSD

EURJPY

AUDUSD

Good trading
Ian Copsey