EUR
Comment: Poking its head above the parapet that is the Ichimoku ‘cloud’, closing at its strongest level since late September. For this morning we shall allow for yet more consolidation around 1.2750, and if prices hold above 1.2725 bullish momentum should increase despite the Euro being a somewhat overbought already. Note that implied volatility has bounced from record lows.Strategy: Attempt small longs on a dip to 1.2740/1.2725; stop below 1.2650. Target 1.2765, then 1.2825.
EUR/JPY
Comment: Still hovering above 149.00, trendline support and the top of the Ichimoku ‘cloud’, but looking slightly more top-heavy following yesterday’s sharp sell-off from 149.79. While below 150.00 downside pressure should increase for a drop to 148.20.Strategy: Attempt small shorts at 149.40/149.60; stop above 150.00. Add to shorts on a sustained break below 149.00 for 148.50/148.20.
GBP
Comment: Once again leading the way, along with Asian currencies, closing above the top of the large ‘flag’ formation. Yesterday’s high at 1.9100, just shy of this year’s high at 1.9146, is likely to give way late today or tomorrow and sets up for a rally to the December 2004 high at 1.9550 medium term. Overbought and collapsing implied volatility should keep traders wary of this one.Strategy: Buy on a dip to 1.9050, adding to 1.9000; stop well below 1.8950. Short term target 1.9100/1.9145, then 1.9325.
JPY
Comment: Slapped down from the 118.00 level yesterday morning, where the 9 and 26-day averages lie. This suggests we shall hold below here this month and adds weight to our view that we will drop to the 114.00 area within three weeks. Momentum is now clearly bearish and the US dollar is not exactly oversold, and futures positions have been slashed dramatically. For today allow for more consolidation above 116.50, and probably no higher than 117.50. Then down again with the next short term target at 116.10.Strategy: Sell at 117.00, adding to 117.50; stop well above 118.05. Short term target 116.65, then 116.10.
