EUR/USD And USD/CHF Are Holding Within Tight Ranges

The past two days I have been waiting for the dollar to extend losses. This seems most logical when looking at the dollar Index and the USD/CHF daily charts. However, the market has been extremely reluctant to commit to the downside with both the EUR/USD and USD/CHF are holding within tight ranges. During this process the GBP/USD has deepened more than expected, although hasn’t actually done anything to confirm losses. I also wrote yesterday that the market can’t maintain this tight consolidation indefinitely and having maintained this to the full limits that it can we must surely see a resolution today.

While the logical outcome in the dollar Index and the USD/CHF is the preferred view the depth of the recovery in the dollar are so close to limits that we should be aware of breaks of these key levels. Even then, because of the already significant losses we have seen in the dollar, deeper than I had anticipated when they began, I shall be scanning the structures for clues. It’s quite a complex process since a very much weaker dollar will have significant implications particularly in GBP/USD that, considering the monthly cycles, would be hard to accept. Anyway, first we need focus on the immediate outcome so do take note of breaks.

The AUD/USD made losses as expected but the structure is slightly mixed. Overall it looks more bearish but seems to have lost its way during yesterday’s decline, or at least seems not to have a recognisable impulsive structure. It almost seems as if it could recycle although currently there doesn’t seem to be much evidence from other indicators. This is another case of needing to know which levels will confirm or deny either bullish or bearish scenarios.

Finally the JPY pairs, the USD/JPY topped out almost point perfect. I can’t say the decline from 99.17 is indicative of further direct losses but momentum does still look bearish. We therefore probably need a little more development to get a better grasp of what will happen with the two scenarios being follow-through lower versus a recycling. The EUR/JPY doesn’t offer much of a clue although yesterday’s low is challenging an area where any break will send it much lower. Again, momentum doesn’t seem to suggest a low being in place and if anything does look more bearish. However, best wait until the key support breaks.

So, basically, we have some ambiguous situations today that will require our attention to spot when either bullish or bearish scenarios are broken or confirmed. Be aware of these levels to be prepared for the implied outcome.