Indeed, while both the EUR/USD and USD/CHF did make new (dollar) lows, they were extreme, while the EUR/USD really caught up in a nasty, messy mini-consolidation. What next? Well, we’re going into an Asian session so not much at all for a few hours but with luck this will provide an opportunity for the consolidation and adjustments to sort themselves out so that the Dollar can extend losses. As mentioned yesterday, I don’t see these being extensive at this point but the potential for Dollar bullish divergences to develop is increasing and which could produce a correction. Again, they don’t look like particularly deep corrections but nevertheless there does seem to be a need for this process to work through.
When considering the Europeans there may be an exception in GBP/USD. I don’t see it being a very direct move but the potential is there for more sustainable gains but being GBPUSD the risk of deeper than normal corrections is possible. However, a prudent approach would be to have these gains confirmed as even I can see the current status quo pre-Asia does suggest that the initial reaction could well be consolidation, and it’s during this process that a deeper correction lower remains an option.
The AUD/USD completed its decline and is correcting higher.
The USD/JPY went nowhere and allowed the EUR/JPY to recover. It should just be a correction and could recover a bit more. Just remember that the EUR/JPY is EUR/JPY and it tends to have a rather alternative way of making a meal out of things and the risk of complications is high. This leaves a rather neutral to bearish impact in the USD/JPY. Yesterday’s sideways ranging was tedious to say the least. Its structural development has been noisy to say the least. Maybe I should coin a phrase and call it shouting, because it’s so noisy. Unfortunately this has the capability of camouflaging the underlying implication, so I’d suggest taking a cautious approach.
Overall a relatively dull end to the week seems most likely…