More Limited FX Moves Today

Yesterday’s FX developments didn’t come as a surprise. In fact they were pretty much in line with my general impressions. The more sideways consolidation in EUR/USD and USD/CHF were implied by their linked prior corrections and while there is risk of a little more, I do sense that the dollar may have more potential for gains today but not in any excess. Much depends on whether the market can break from the consolidation we have seen.

In terms of the Europeans it may be that GBP/USD may buck the trend and see a deeper correction. In terms of momentum that’s a little touch and go as momentum is pointing lower but at the same time could alternatively generate a bullish divergence if we begin to see some strength. A natural recovery in momentum occurs later in the Asian morning as some larger negative bars begin to run out of the calculation. Therefore, we do need to take care during this period and note the next break – whether higher or lower…

So in general the Europeans are likely to see limited moves today, potentially quite erratic and once again suitable for quick trades rather than looking for sustained moves.

The Aussie has slipped a little further and looks life reaching the slightly lower projection targets I highlighted yesterday. I still feel it is due a deeper correction so if anything this should be a buy on any further dip. However, like GBP/USD hourly momentum is still pointing lower but with the potential for a bullish divergence. It’s therefore more advisable to wait for a stronger signal.

Finally the JPY pairs, both topping out where I had suggested. USD/JPY saw a slightly firmer pullback but not deep enough. I still feel this has further to drop. The more balanced outlook is in EUR/JPY that also didn’t reach its retracement target (that is slightly shallower than USD/JPY) and sits in a rather balanced position between a second decline and possibly a slightly higher projection target. Probably this will very much depend on EUR/USD rather than USD/JPY. However, of the two I feel USD/JPY has the stronger outlook and still as I indicated in yesterday’s video outlook.