While there were some mild surprises on Friday it hasn’t changed the underlying outlook. That EUR/USD made a new low on Friday was probably the biggest upset but with 4-hour and hourly bullish divergences I wouldn’t want to bet on the downside today. The dollar index is beginning to see bullish momentum slow with some modestly firm bearish divergences – and this tends to confirm the outlook. Therefore, we are in corrective structures and when that happens we have to understand the degree of the correction and then judge from the development which corrective structure is likely to be seen. From my perspective this looks quite choppy and could last for a day or two more.
So we should see early trading being quite subdued, has some minor early potential for gains but over the day basically in a weaker dollar. This appears valid across the Europeans and USD/JPY – perhaps even in AUD/USD. This will require some patience to wait for the right moment to enter the market for the dollar weakness to develop.
EUR/JPY slipped further lower, avoiding the potential for a complex correction, but even here we have an hourly bullish divergence but which will have to battle with the declining 4-hour Price Equilibrium Cloud. This could be a bit tricky, particularly from the EUR/USD side of the equation, so best take this step by step.
Watch the Dollar Index also to confirm the expected weakness…