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Dollar Weakness Looks Valid In USD/JPY

Dollar Weakness Looks Valid In USD/JPY

My underlying view of the dollar remains bullish. I have not abandoned the view I made over one year ago (and longer) and continue to see next year as reaching a major dollar high. Over the past couple of weeks I have been observing a potential barrier in USD/CHF around 1.0200-16 but was more willing to give up this barrier in favour of dollar gains. Yesterday’s strength in EUR/USD has proven the view in USD/CHF was correct. I have to concede to further gains in EUR/USD. This additional rally does not change the larger multi-year structure and the now anticipated dollar weakness should not be excessive and looks like generating an expanded flat in the Dollar Index.

Therefore, we need to build on the current situation in hand. This dollar weakness looks valid in USD/JPY and potentially in GBP/USD although the pound is more likely to see greater whipsaws. Both EUR/USD and USD/CHF are likely to see steady progress rather than frantic trends. Therefore, it may be better to watch for shorter-term trades. The rather choppy lower degree waves are still subject to make the chart look a bit like a baby scribbling on a piece of paper.

One puzzle I have is in AUD/USD. It has a rather difficult development – one that should require another high but we have already seen a significant pullback and I wouldn’t be surprised to see it lead the dollar rally – but probably not until next week.

With USD/JPY not quite clear, it will be best to confirm losses. It will be useful to use the rally in EUR/JPY to make judgement as to when it will see a reversal. Clearly, this doesn’t look like being controlled by EUR/USD so a top in EUR/JPY will suggest that we’ll see it’s “parent” moving lower…

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