I shall be taking a break over the coming week to catch up on sleep… Therefore, I shall just make some observations for the period to next Friday. Clearly we have seen extremely slow and cautious trading over the past 10 days or so, a slow grind higher in the dollar - slightly stronger momentum in GBP/USD. For the coming days I would not be surprised to see the current range persist (plus maybe a marginal new dollar high over today … in some pairs). While to many, these dollar gains may have looked corrective in nature, there has been an impulsive action. It’s not uniform across all pairs – and in particular EUR/USD and USD/CHF are not on the same page in terms of expectations. This suggests a mixed outlook and potential complex corrections that could compensate for the lack of a consistent outlook across the different pairs.
Overall, this doesn’t really suggest that we’re going to see decisive trends over the course of next week unless, of course, there is any particular catalyst that will trigger a more panicked reaction. We’ve had the ECB make a noise about interest rates. The Fed appears set on its course for now. Hence the lack of any strong impetus by traders to push boundaries.
Of all, I see GBP/USD as the pair that has a more defined structure at this point – perhaps AUD/USD also - although they do not seem to be sitting on the same road. This is just another conflict within the mixed and jumbled structures. I’ll even add the U.S. Dollar Index that has behaved quite well this past week except the recovery has been a little firmer than I had expected, but may well end up developing in a triangle – hardly a surprise given the comments above.
I am also convinced that EUR/JPY is not going anywhere particular quickly… and while USD/JPY has been making headway on the upside I still have some doubts. The structure all the way from the 110.97 low has been mixed and complicated. Therefore, unless there is any obvious trigger I’d suggest taking it step by step.
In summary, this coming week, it will be best to look for continuation or reversal patterns with supporting indicator evidence for quick trades…