Overall I am quite satisfied with how things developed yesterday. I mentioned the 4-hour Price Equilibrium Clouds were capping the dollar and this continued to be the case for EUR/USD and GBP/USD but USD/CHF managed to break above. This tends to suggest the potential for EUR/USD and GBP/USD to have a second attempt to reverse through these Clouds and with momentum conditions tending to provide the opportunity for a break today we should be on alert. Even then, this is basically building the foundation for a firmer directional move.
I do have some concerns over GBP/USD that extended the recovery from the 1.3835 low. This appears to be too strong for a normal correction in the current position and while I suspect we’ll begin to see losses before too long, I’m not yet convinced that it will provoke a strong reaction. This is probably a pair to avoided…
The Aussie extended the upside as expected but we should be heading into a period of more whippy and erratic development – still basically on the upside but hardly in a robust trend. I would tend to suggest holding off for the right time to pick a trade.
The alternative outcome in USD/JPY developed yesterday. I had some reservations here and it did break the support level I pointed out. This allowed EUR/JPY to drift lower but then later move back higher towards the end of the day. With the apparent weakness being displayed in USD/JPY there are some downside risks but it hasn’t yet quite broken down. However, I can’t see any gains in USD/JPY being stronger than EUR/USD. There is therefore still need for caution…