Dollar To Correct Lower Today

An interesting day with chess-like moves. The underlying development in the dollar can be represented by the dollar Index that recorded an important low at 83.43, and continued its move higher. All the majors contributed to this rally yesterday, but not all with the same structure. the USD/CHF and GBP/USD certainly seem to have resumed their basic dollar-bullish moves. I am undecided regrading the USD/JPY, and the EUR/USD remains a bit of a mystery with its ambivalent. structure. I feel that there is one scenario that suggests it could even still break above 1.2997. Well, we’ll have to wait and see.

As for the others I can’t help but feel that the current Dollar rally is running out of steam and due a correction - one that could be modestly deep. If there is any moment that the EUR/USD can spring a surprise, then this could be it. Even then, if I have the structure right, it’s unlikely to be particularly direct. For the moment I’d rather pause and have this current (corrective) reversal confirmed and observe how this develops, or whether it develops as it seems to be a fine line in the sand between direct follow-through and my thoughts of a correction.

The USD/JPY rallied quite firmly yesterday dragging the EUR/JPY in its wake. Here, too, we are at a critical moment. The USD/JPY has not broken above the 102.58 swing high, an event that would trigger further gains. Until that point there remains a risk of a return to Friday’s 100.66 low and possibly below. This event could obviously risk seeing the EUR/JPY move back lower and extend its sideways consolidation. My preferred outlook for the cross is bearish, but yesterday’s recovery tends to place it in a rather widely swinging consolidation. Thus, the balance between the USD/JPY and EUR/USD does look rather fragile.

There are quite a few balancing acts going on in what seems to be a web of interlaced structures that would imply some quite stifling corrections/consolidations.

I suggest taking care at this point but do remember that the basic Dollar direction is higher, so don’t fight any significant strength beyond yesterday’s closing prices.