Universally Strange Markets Require Caution

I opened yesterday by observing that the markets seem to be universally strange at the moment. The week has seen the euro do very little and very slowly. The Swissie had a rush of blood to the head. The pound has lost out but in an extremely erratic decline, the Aussie jumping around on a bungee rope and once again, yesterday, we saw the market treat the yen as a pariah. Add to all that, the euro strengthened against the dollar, the pound weakened and the Swissie also made grounds against the dollar. More than that, the internal structures have become rather haphazard.

The market is flapping around like an old cod…

We’ll have to watch the key resistances in the euro and in GBP/USD. The latter does seem to need to see further losses. Indeed, from the Dollar Index I still feel there needs to be a little more dollar strength. Therefore, do take note of dollar support areas that need to hold to maintain the general upside move. Failure will result in what could be quite strong losses.

What about the JPY pairs? Just as I had thought I’d got that under control again, USD/JPY broke through key resistances and has made new highs. I spent a good 1-2 hours just knocking around with ratios to make sense of it all. What I think I have seen has shocked even me…

When I had called USD/JPY higher soon after the 77.12 low, I set what I thought was an aggressive target around 100-101. After spending those 1-2 hours working with potential relationships, allowing for alternation between the Wave 2’s and Wave 4’s I still came up with the 99-101 area but only as an intermediate target - the eventual target appears to be above 101. It sounds a bit scary but the interesting part of wave development is the first target after a major reversal. It was something I considered when looking at the weekly/monthly charts but yes, this stronger bullish structure does seem to point to above 101 over the coming few months. Even more surprising is that August sees a 48 week cycle low and thus suggests a pretty limited correction. Well, first things first - I’d rather make sure that we see appropriate development over the coming day/week that suggests the revised target is correct.

Today, I’d still recommend caution all round in this haphazard market.