A Stronger Directional Move Is Due

Another day of rather tedious and listless movement. That may be frustrating, but there seems to be one positive that can be derived from this form of trading, which is corrective and as such should spurn further Dollar losses. That even seems to apply to the GBP/USD, where I had tentatively thought it could possibly make a new low. However, even that has developed in a rather cranky and messy manner that doesn’t bode well for the downside.

So the next question is, “is the correction complete?” In terms of depth it’s fine. In terms of structure I’m not so sure… If I am to place a bet on this then I’d go for extension of the correction. I can’t see this being extensive, and we should probably now be thinking more in terms of when the dollar begins to extend losses. This applies to all the Europeans.

The Aussie, after pushing to new lows, corrected higher and is somewhere between a tree in the middle of the countryside and a pig. Unfortunately the pig is hiding behind another tree, so the outlook is rather vague. Yesterday's 4-hour momentum dipped lower and broke the bullish divergence. The daily divergence remains. I do see the recovery as more corrective, so the emphasis does still seem to be lower. I’m not comfortable about being caught in the middle of the field without being able to see the pig. I prefer to see more evidence.

Finally, the JPY pairs. Both moved higher. I wasn’t too surprised with the cross, but I was with the USD/JPY. I can only say that the 98.23 low seems to be the first wave, but I’m not too comfortable with the structure. Still, at this point I prefer the downside and with little wriggle room left for the cross that’s very little. However, the concerning factor is that we’re going to require a pretty aggressive move lower in the USD/JPY to offset any strength in the euro. Overall, this is still a slightly grey area that needs some confirmation from the USD/JPY in particular.