EUR
Comment: Little to add as we consolidate in a small ‘triangle’ and at-the-money implied volatility dips to a still relatively expensive 21.00%. Obviously we cannot hold inside the formation for much longer but be careful as a ‘false break’ is very possible.
Strategy: Attempt longs at 1.2700; stop below 1.2495. First target 1.2900, then 1.3100.
EUR/JPY
Comment: Consolidating surprisingly neatly under the 38% retracement resistance level of the final leg lower. Therefore we feel there is still a small chance of a squeeze above the recent high at 131.00, at which time at-the-money implied volatility should increase.
Strategy: Possibly attempt small shorts at 124.50 but only if prepared to add to 128.50; stop above 131.25. Cover shorts ahead of 122.00.
GBP
Comment: Dull and disappointing and we shall probably have to put with more of the same this week. Beware drawing trendlines too tightly and note that at-the-money one-month implied volatility remains very high at 23.00%.
Strategy: Attempt longs at 1.5625; stop below 1.5400. First target 1.6000 then 1.6400.
JPY
Comment: Same old story as we continue to consolidate in a small range. Expect more of the same today noting that the ‘Lagging’ line at 97.97 is approaching candle resistance for the next fortnight between 99.00 and 102.00. Note that despite decent volume open interest in the futures contract is less than half last year’s peak.
Strategy: Attempt small shorts at 97.95, adding to 99.00; stop well above 100.00. First target 97.00, then 96.00 below which should probably trigger a sudden collapse to 92.00.
