EUR

Comment: Consolidating below 1.3180 but giving up very little room even at these lofty levels. The Euro is overbought but this is unlikely to hold it back for too long as bullish momentum is stronger than it has been since May. Note that at-the-money implied volatility has exploded from record lows earlier in the month and futures positions are being rebuilt quickly. Our upside targets are 1.3200 short term and 1.3400 further out.

Strategy: Strategy remains unchanged: buy on a dip to 1.3100, adding to 1.3000; stop below 1.2950. Short term target 1.3180/1.3200, above which another flurry of buy stops are likely to be triggered taking the Euro to 1.3400.

EUR/JPY

Comment: Very well bid and better bid than some other Yen crosses. We continue to favour a rally to 155.00 where more consolidation is likely. If we can hold above 151.80 this move is likely to be sooner rather than later.

Strategy: Attempt small longs at 152.45/152.20; tight stop below 151.70. Short term target 152.50, then 154.00 and eventually 155.00.

GBP

Comment: Record open interest in the futures contract and an overbought pound as implied volatility surges (from extremely low levels) suggest slightly overly aggressive positioning. Generally while above 1.9100 we feel that the next step will be higher for a re-test of 1.9500/1.9550, the December 2004 high. However, on the way there, and once we get there, it will not be plain sailing and there are likely to be big price swings.

Strategy: Buy on a dip to 1.9350/1.9300; stop below 1.9200. Short term target 1.9450/1.9475, then 1.9500 and possibly the December 2004 high at 1.9550.

JPY

Comment: Stabilising at 38% Fibonacci support and the 200-day moving average in what looks like an A, B, C-type pullback where C equals A. Allow for more work above 115.40 this morning and maybe all day, potentially with a sharp short squeeze on a break above 116.50. Rallies are likely to be capped around 117.00 and are seen as selling opportunities for a subsequent move lower to 114.00 and maybe 113.45. The dollar is only slightly oversold and momentum is bearish.

Strategy: Sell at 116.20 but only if prepared to add to 117.00; stop well above 117.20. Short term target 115.50, eventually 114.00.