Market fatigue

The first two days of this week have been disappointing. I have been looking for Dollar strength but which has failed to materialise. The issue is that we are in a correction – one that I had expected to be limited but has taken the deeper path. With the market not really interested in actually trading, the toss of the coin has gone the wrong way. However, the structure hasn’t broken down but, as long as my view is right, the outcome I have been promoting remains my preference.

There was one interesting development – the negative correlation between the Continental Europeans and GBPUSD, the latter extending losses as I had expected. The risk now is for a correction higher in GBPUSD and the question whether the negative correlation will continue but with the Continentals finally seeing Dollar gains. The additional puzzle is that with a lacklustre market momentum is not really a great indicator at this time of the year. We have a channel in EURUSD and a descending wedge in USDJPY and ascending wedge in EURJPY that could provide some signals. Breaks of all would tend to suggest Dollar gains.

So on this assumption, the rest of the year should mostly be a Dollar bullish one. The most critical currency pair I see is in USDCHF that cannot really break below the 0.9785 low and really shouldn’t even get close and that will be the alternative risk if my outlook fails completely. That AUDUSD has been pushing higher is a little disconcerting in terms of a correlated market also. In many ways, it is my favoured outlook, for a bullish Aussie, but I’ve been trying to find the balance here.

Thus, as my last outlook for this year, there are some conflicts but there are some clear break levels if my Dollar bullish outlook fails. At this point it’s still in the bullish zone but we do need some firmer strength over today and into the end of the year to generate more confidence.

May I wish you all a wonderful holiday season and a profitable – but more importantly – peaceful 2016.

Good trading

Ian Copsey  

FRACTAL FORECASTING – A COMPREHENSIVE GUIDE TO FORECASTING

WEEKLY OUTLOOK FOR EURGBP

INTRADAY CHART

22nd December:

The Wave -b- / -v- has been deep. Perhaps we have seen the high but allow for a little above 0.7345 because there is no clear reversal indication except for a break below the rising channel. However, I can't see a particularly strong move above the current high. This will then need to form a Wave i and Wave ii to provide us with information for the Wave iii.

Overall, we should be expecting to see losses to the Wave (iii) target which suggests the most likely target at the 361.8% projection at 0.6833. Thus, watch carefully around this area for a possible bullish reversal indication to provide teh Wave (iv) pullback.

Good trading

Ian Copsey

Pre-Xmas escargot

The (half) week began with a naked snail trail – otherwise known as a ‘slug’-gish market. Perhaps it should have been no surprise given this is probably the one week of the year that the entire market has given up trading. More, it’s a game of pass the parcel. No one wants to hold a position. Having said that, while there is a risk of continued consolidation we have reached the expected limits of this correction and I can’t see a uniform risk of a complex correction. Therefore, watch out for the risk of a resurgent Dollar over the next two days. How complicated that may be is unknown.

The expectation of further strength in the Dollar appears uniform across both Europeans and USDJPY – potentially AUDUSD also. I sense that the Europeans could outstrip USDJPY in terms of movement, the latter at risk of seeing a potentially lengthy sideways consolidation. This isn’t set in stone, but looking at the structure from the 116.16 low in USDJPY, I cannot help but feel that it’s going to “do” a EURUSD in terms of a longer sideways correction. It’s just an observation at this point but it’s certainly an outlook I feel is quite possible.

The Aussie is still in a delicate position but needs a catalyst. This tends to suggest an upside-down slug-gish day. It will still be prudent to note the levels on both sides of the market that will trigger a more directional move but the general sideways move over the past month has been ragged and, to be honest, hardly provided a convincing structure on either side of the market. We need a stronger break to generate a more directional move…

As normal, at this time of year, take it easy but I feel we should see Dollar strength today.

Good trading

Ian Copsey  

FRACTAL FORECASTING – A COMPREHENSIVE GUIDE TO FORECASTING

Push forward this week

We basically have a three-day week this week. Obviously, Friday is an almost universal break, Thursday is generally a half-day and that just leaves the first three days for trading but mostly there is a total lack of interest in trading when liquidity is at its lowest ebb in the year. Of course, there will be movement and can be relatively sharp at times, due to the thin liquidity, and therefore we must be aware of the potential for some reasonable directional waves. Having said that, we are in a section of the structure where, once a modest trend has developed that the risk will be for a correction that can be complex and therefore trigger a sideways consolidation in slow, ratcheting and erratic development.

As the week begins we seem to have limited follow-through from Friday’s consolidation/corrections so don’t get caught waiting for excessive losses in the Dollar. This should be followed by a directional wave into Tuesday and probably Wednesday… and then comes the risk of stagnation.

Just looking at USDJPY that can tend to make a unilateral decision to make extended moves, frankly it doesn’t look like it this year, or at least before next week. Its sharp drop on Friday was a bit of a surprise but in terms of preference of outlook, I tend to look for a recovery but may well begin to move sideways. This tends to work with EURJPY that saw some decent losses also, and could see further losses today – but probably only in a limited manner before correcting. Then it’s a matter of how EURUSD will develop. The structure is there. We just need to make sure of any breaks that may force a stronger move…

Have a profitable week

Ian Copsey  

FRACTAL FORECASTING – A COMPREHENSIVE GUIDE TO FORECASTING

DAILY FORECAST FOR EURUSD

INTRADAY CHART

BIAS: We should see a correction back to 1.0877-87 at least - possibly as much as 1.0945-50

Resistance:	1.0855-60	1.0877-87	1.0910-25	1.0945-50
Support:	1.0802	1.0785	1.0757-66	1.0705-10

MAIN ANALYSIS: Losses were stronger than expected - dipping through 1.0840-55 but but stalled just above the 1.0795 low. We should now see a correction higher. The first target should be the 1.0787-87 area and is likely to see a correction lower. It's not impossible that it could be THE high. However, there's probably more risk of a move to 1.0910-25 at least - and probably max around 1.0945-50. Thus from 1.0900 upwards observe for bearish reversal indications. 

NOTE: Should the correction develop in 3-waves (and replicated in USDCHF and GBPUSD) then note the risk of a complex correction - flat or expanded flat. This is quite possible because the daily Price Equilibrium Cloud is currently supporting price and rising mildly and may need a day or two to flatten out.

COUNTER ANALYSIS: Only a break above 1.0980 could threaten the 1.1011 high. If this breaks then note resistance at 1.1030-37 and 1.1059 high. 

MEDIUM TERM ANALYSIS:

17th December:  It looks like we've seen the high and now need to establish the foundation waves for losses that should move back to 1.0539...

Only back above 1.1059 will concern.

Good trading

Ian Copsey

Pullback into the weekend

I’m pretty happy with the way things developed yesterday. Maybe the Dollar gains were a little stronger than I had estimated but this particular move didn’t really have any precise targets and required judgement as the rally developed. This rally hasn’t quite ended but it’s not far away so the implication is for a pullback into the weekend, perhaps into next week. The depth of the pullback can be roughly judged, not necessarily individually, but from USDCHF in particular that is currently in a Wave a / iii position and that limits the depth of the correction in Wave b / iii and should provide rough and ready target areas for the other currencies. Of course, these corrections all have potential for complex developments and that is probably the more problematic issue but first things first, we can observe the requirements that will dictate whether there is potential for a complex.

The above applies specifically to the Europeans. In the Aussie, I had been looking (at some point) for a test of 0.7100-05. Yesterday’s 0.7096 low looks good enough. I have been very defensive about this pair and even if yesterday’s low is good, there are still some issues to resolve. I suspect over the coming days – hopefully before Xmas – we’ll have a resolution of the larger wave structure. For now it’ll be best to remain neutral although, as with the Europeans, we should see Dollar losses into the weekend.

The JPY pairs did not surprise either. USDJPY rallied – not yet to the initial target but does seem to have potential for further gains but like the Europeans the risk will be for a pullback into the weekend. This may provide EURJPY to take the day off, rather like the past two weeks… Its meandering development has remained within a neutral zone since the 4^th December high. There has to be a break before too long but currently the general correlation between EURUSD and USDJPY does seem to pointing to limited development in the cross… Don’t expect any immediate joy from EURJPY…

Have a great weekend

Ian Copsey  

FRACTAL FORECASTING – A COMPREHENSIVE GUIDE TO FORECASTING

May we get some peace and quiet now?

Santa Janet gave us an early Christmas present but it’s so well wrapped up with string, sticky tape and Santa’s hair caught in the binding that it’s impossible to open it. Thank you for that mess Janet. While I remain looking for the Dollar to continue rallying, we have the immediate problem of deciphering the corrective wrapping… Most likely Asia will not attempt to touch this wrapping and therefore we’re going to have to wait for Europe to come in, take a look and perhaps attempt an escape. The risk is further consolidation.

What may be the solution is patience and remembering that with two days of declining before the weekend, and further lack of interest into next week, the chance that we could see some steady Dollar gains in a game of pass the parcel that will provide a trend.

Even USDJPY appears to have joined the gang of four, to include the Europeans, to provide a correlated rally that should see the Dollar Index push above the 98.90 high and provide a basis for a move back to the 100.51 high.

The Aussie is a little more complicated. This still appears to be in a rough and ready consolidation and I’m not really too keen to dabble in this pair until it has begun to seeing breaks of either key highs or lows. I’ve been pretty neutral over the past week or so and until there’s a stronger break I’ll remain that way.

This leaves EURJPY remaining but frankly it hasn’t seen any flicker of a stronger flame. The past few days has seen a recovery but more in a lacklustre manner. With EURUSD and USDJPY tending to the Dollar upside it’s hard to get too excited about this pair either…

Good trading

Ian Copsey  

FRACTAL FORECASTING – A COMPREHENSIVE GUIDE TO FORECASTING