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Potential Consolidation Today, GBP/USD Should Gain

Potential Consolidation Today, GBP/USD Should Gain

There come occasions when I know a deep correction is due but find it difficult, due to excessive noise in price development, to identify the extreme from where the correction will begin. On other occasions, the foundation stage of a new directional move contains noise and makes it difficult to be 100% certain of identifying the right base forming waves.Friday saw examples of both of these in play. EUR/USD wasn’t so much of a problem with the key support that pided pullback versus continuation holding perfectly. However, the USD/CHF turned down slightly sharper than I had thought, and the GBP/USD maintained its rather cranky and erratic development while the USD/JPY saw a deeper than expected correction.So they were the bad news. The good news is that once we see such development as we did on Friday it clarifies the structure much better. One key element here is USD/CHF. I knew that a deep correction would have to be seen. Not only would it be deep (for its position) it would also more likely turn into a sideways consolidation. As for the GBP/USD, that one’s a bit mixed, but I suspect (or want to believe) that it make surreptitious gains while the other two Europeans sort out their problems.USD/JPY presents another issue. I wouldn’t totally rule out a sideways consolidation but only within the understanding that its main direction is higher. The deeper than expected correction ironically implies a steeper rally – a product of one of the issues of “noise” mentioned above. Effectively the misjudgment of the foundation waves has shifted those higher, and thus implies a slightly stronger outcome. The only question is whether, at this stage, it moves sideways first or just directly higher. I suspect the latter.What this implies for the EUR/JPY is a bit of an unknown quantity. It looks like rallying today based on a strong USD/JPY. Quite how EUR/USD fares is obviously the key add-on factor, and potentially more complex given the outlook in USD/CHF (in which I have greater confidence.) Thus, there are a few combinations to watch so take care. Possibly the USDJ/PY could provide the best vehicle today.Additionally, the AUD/USD is a mixed bag. I think a bit higher, but expecting a deeper correction/reversal lower from not too far higher.

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