Dollar Losses To Resume By The End Of The Day

While we saw the dollar extend losses on Friday the limited nature is more consistent with an extension of the prior move rather a new wave beginning. I had mentioned that I did have some reservations about the development in terms of harmonizing the retracements but with Friday’s follow-through the ratios became more in line with the norm. Thus, we’re back in the same boat as Friday, expecting a correction lower but still within the context of the current position that has no identifiable retracement levels.

Having said that GBP/USD made a modest push higher to form its own initial leg of the current rally and thus requires a correction. Equally, it has no fixed retracement but since the rally has been modest only there is a narrower range of possibilities. As I mentioned on Friday, my focus will be on the 4-hour price equilibrium zone that stands a good chance of holding.

Overall, the dollar still looks more like extending losses and we just have to judge the limits of the corrections. I get more of a feeling that it’s not going to be a massive 90%-100% retracement as there are more limited implications in EUR/JPY and even more limited in USD/JPY. With the cross expected to make a firmer push higher on the next attempt it does seem as if EUR/USD will be needed to provide assistance to USD/JPY in the upward progress.

The aussie withheld the attempt to push it lower. It’s is still in no-man’s land but just note that any break above last week’s high should provide it with a boost. If that is seen it will bring it into the dollar bearish camp and this should provoke some stronger extensions over the coming days.

The only thing that does raise a small question mark is the losses seen in U.S. equities. It’s in contrast to the general correlation with the dollar but perhaps there are extenuating circumstances as they move into the final push to the Presidential elections. Even the Hang Seng has chosen not to follow the U.S. markets and remains in its own uptrend.