The last two days of trading last week seemed to be out of sequence. Thursday saw a more volatile day while Friday, even with the NFP release, really didn’t move the market much at all. Clearly, yesterday’s stateside holiday made for a quiet start to the week and this will probably extend into the European session.
When real trading resumes in a state of normality, we need to be alert for any trading signals. I can’t see yesterday’s comatose trading continuing. There is a risk of a limited stalemate initially, but I can’t see it lasting for too long and therefore follow the break. The Europeans look to be correlated and therefore the next move for the dollar should be consistent across all three.
In AUD/USD we’ve seen losses into the projection zone, but I’m not convinced this has completed its move yet. This does reflect a similar outcome to the Europeans in terms of an initial stand-off but then further losses.
With USD/JPY breaking below 119.22, we have an alternative outcome but not one that is exactly clear. Here, we are going to have to observe the ratio structure more keenly to identify whether this is part of a corrective process or impulsive. I shall provide the expected high-risk levels for the impulsive, and therefore, we need to ensure that projections are accurate. If these are wayward, it will imply a more corrective structure.
This should be coordinated with EUR/JPY which doesn’t seem to have much upside cushion before the decline continues. Thus, through to European trading, there’s a risk of stagnation, but this should provoke further progress.