You gotta love the market. The last two days of last week were in stark contrast – boredom versus frenetic. It wasn’t the exact pattern I had expected and has caused some minor changes, particularly in USD/CHF, but in terms of the bigger picture it hasn’t really changed things except for the persion we have seen.
It just makes things a little more complicated in terms of correlations – particularly in the Europeans. From that perspective, I’d prefer to see confirmations of my expectations over today to ensure that I’ve interpreted this twist correctly. Basically, I can’t see that we shall see rabid dollar gains today.
This is much the same with AUD/USD that followed the European template – a deeper pullback and then a panic at the end of the day. Like the Europeans, it hasn’t changed the structure at all – just the deeper initial recovery but then the losses I had been looking for. So basically, it looks like the Aussie and Europeans are basically correlated.
Now, where there has been change is in the JPY pairs. For the past week I had been very cautious about both pairs. I had/have my final outcome in mind, but was uncertain of whether we had seen the lows in USD/JPY in particular. In some ways we haven’t yet really seen confirmation, but I’m pretty certain of what is now happening.
However, in EUR/JPY that had been fussing around a bit and causing some ambiguity, Friday’s push higher has changed things a bit. It has certainly broken the structure I had been considering, but this just changes this into an alternative corrective pattern. This tends to resonate across the Europeans and with USD/JPY also, but suggests continued complications in the cross that should last for a week or two at least.
I can’t see Friday’s dollar gains being excessive today.