I found yesterday a bit frustrating. EUR/USD made a minor new high, USD/CHF a deeper pullback and GBP/USD slept for most of the day but did at least break below the channel support – even if it didn’t seem to want to. Having said that, price in all three did make an effort to penetrate the 4-hour Price Equilibrium Clouds on the dollar upside and force the Clouds to flatten out which can then allow a stronger break. It’s certainly needed and any failure would tend to increase the risk of more complications. Basically, any break above yesterday’s dollar highs would contribute to the bullish outcome. This is even reflected in the Dollar Index.
While the Europeans appear to be set as a group, USD/JPY slipped lower. That disappointed and also raises the risk of an even longer and broader sideways consolidation. At 112.41 it is looking a bit vulnerable although there is an hourly bullish divergence. That said, it still needs to break above 113.24 to bring us back into the narrower consolidation. Either way – a minor new low or a direct break higher will still imply consolidation for now.
This tends to suggest continued losses in EUR/JPY. The decline has been slow but steady and still has potential to extend a little more but there will come a point where a deeper pullback will be required. Thus, watch the key levels in USD/JPY in particular and also in EUR/USD, the latter really needing to make its presence felt now.
The Aussie broke below my support but given the earlier – and very choppy - rally I still feel this has more upside. If there is any other risk it may be consolidation.
Thus, watch for a more directional move today…