Forex Watch: Early Signs Of Life?

The Dollar ticked lower against the Euro and Swissie. Has it been enough to confirm the move lower will resume? (Sound effect: cogs creaking in head.) Probably not yet, but an early first step. The Euro has popped its head above both hourly and 4-hour Price Equilibrium Clouds. The Swissie is still battling to break clear and if I can include the Aussie in at this stage, it has also made some positive progress to breaking free from its bearish shackles.

So I guess the general theme is still a workman like approach. It’s not yet a time to place an all-or-nothing bet so keep a tight control over money management but I think now erring in favour of the Dollar beginning to move back lower.

How does this impact on GBP/USD? Probably not much at all, to be honest. There’s risk is still for a mild extension on the downside but a correction is due. The hourly and 4-hour bullish divergences have melted into the general turn lower in momentum so I don’t expect much more than a modest correction before the downside stretches further. However, the correction may well comply with general European correlation… for the time being.

USD/JPY slipped and slid and dragged EUR/JPY lower but not to any great extent. I sense here a mixed outlook in terms of the individual performance of USD/JPY and EUR/JPY and one that tends to favour the cross rallying more steadily compared to USD/JPY. That doesn’t mean that I don’t think USD/JPY will rally also but I’m not convinced (yet) that it will directly resume its startling upward trajectory. Thus, there could still be time where the cross shoots higher on the back of both EUR/USD and USD/JPY rallying but I feel we need take care with following this too closely as I do feel there may be times where the link will break down. It’s still one to watch but with clear upside limits in USD/JPY that will be the make or break of any move higher. For today, USD/JPY has done enough in a correction but does hold the option of another dip. The break levels between the two are quite clear though.

Thus, retain a cautious approach until a stronger signal has been generated in the Europeans. Take care with USD/JPY…