Toss-Up Between Pullback Or Follow-Through, With USD/JPY Only Clarity
The week ended on a more conservative note, but was expected. From this point, it almost looks like a toss of the coin: pullback or follow-through. To be honest, it could go either way today, although the final outcome is quite clear. Much will depend on the first half of the day, most likely Asia, providing limited impact, as normal, but then either Europe or a combination of Europe and North America providing the first major move.
In writing this, I am very aware of the basic time frame for this continued multi-month sideways consolidation to end. This suggests a period of initial broad consolidation that should then later expand into the larger consolidation range. Therefore, the process is likely to continue to be slow and cumbersome with a high level of volatility. With the relatively strong correlation between the pairs, it tends to suggest the cross rates are also going to be pretty slow. This appears likely in the Aussie also.
So the emphasis should be on spotting breaks that will provide us with more information and direction. While caution should be given to USD/JPY, that appears to have limited options, it would be useful to understand these break levels in order that it could provide information about the Europeans/Aussie also. Indeed, if there is any pair that has modest clarity, then it’s USD/JPY…
Not an easy start to the week, and I doubt much of the market will be clear; it’s probably USD/JPY that has a clearer outcome.