Overall Friday went pretty well with the exception of the Aussie. Indeed, the Europeans developed close to expectations although that was the easier part of the puzzle to which I referred on Friday. Having sat down and looked at these three pairs I am a little more confident that we’re merely seeing a slightly deeper correction than I had initially anticipated.
Part of the clue was the manner of development in GBP/USD that has not generated impulsive wave relationships. In other words it is correcting higher and doesn’t appear to have an enormous window on the upside which had the Continentals been mapping out a stronger reversal then we’d have to see a clear negative correlation. Well, that can happen but I seriously doubt it.
I made mention of the issue of the proximity of the Wave iv to the Wave b of iii in both GBPUSD and USDCHF on Friday. That had to be resolved with an adjustment in perspective. This has been resolved and was actually part of slightly more complicated intermediate leg within the overall correction. Hence this has generated the expectation that we shall see a slightly deeper correction than expected.
The Aussie is bugging me. It often does with its own distinctive style of development. When considering the basic technical considerations there does seem to be strong bearish momentum and thus, without any shock factor entering the equation, the downside does still present the larger risk. I really would like a slightly deeper correction higher but I’m not sure it’ll pander to my wishes. We’ll have to see. This morning’s open has been positive and with the US dollar expected to lose out, there is a chance.
Finally the JPY pairs were a little more volatile than I had wished to see. In particular EUR/JPY pushed higher than I would have likes on Friday and seems far too high for the last leg of a triangle. The losses in USD/JPY were also a bit strange so I’m sensing something isn’t right. Therefore, I’m more defensive on these two today and would like to see some definitive breaks to lead the way.
That really just leaves the Europeans with a more definable outlook – dollar bearish but could be choppy.