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Forex: Erratic Development To Continue

Forex: Erratic Development To Continue

It has sure been a tough week. The post I made on the 12th January appears to have been correct. Here we are 10 days later and we haven’t really gotten too far. It still suggests that this correction has some while to go – at least to mid February I’d hazard to guess. It seems to be a similar event that we saw for 9-10 months of last year – but thankfully with a much more limited time frame. However, the propensity for the development to be super charged on volatility will continue to be the main risk. It is the type of move that can see corrective highs/lows break by a small margin and reverse – and for particularly deep Wave b’s of Wave iii. The charts will look like a baby’s scribbling.

I was very mixed yesterday, the structures still difficult to judge. However, I think today see a break from that pattern and generate a stronger directional move – of course within the overall consolidation. We have seen (dollar bullish) breaks of the 4-hour Price Equilibrium Cloud in both EUR/USD and USD/CHF. Naturally, referring to the description above, price reversed to retest those Clouds but I suspect we’ll spend a little while on the Dollar bullish side – obviously still with high levels of stinging whiplashes – that should extend into early next week.

The Aussie has had its own problems but basically in the expected recovery. This can replicate the baby’s scribbling too. So expect wide swings but basically higher – but note that it is challenging the daily Price Equilibrium Cloud – so don’t fight any stronger decline.

USD/JPY recovered but I remain cautious – particularly because EUR/JPY corrected deeper than expected and then saw a whip back lower to a new price low. This has added a degree of uncertainty and while I had begin to look for a reversal higher, I am not so sure now whether USD/JPY and EUR/USD can muster any upside threat. It will require USDJPY to extend gains – but it must first break above its daily Price Equilibrium Cloud. Until then the outcome is rather uncertain.

Probably the best bets are in EUR/USD and USD/CHF – with care, in GBP/USD also.

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