EUR
Comment: Very strange price action, so subdued compared to what is happening in other markets, almost as if an invisible hand was propping up the base. Surely we cannot hold inside this rather nasty ‘triangle’ for how much longer, and remember this currency pair may be subject to ‘false breaks’. Therefore implied volatility should remain high.
Strategy: Possibly attempt tiny longs at 1.2500; stop below 1.2300. First target 1.2700, then 1.2800.
EUR/JPY
Comment: Dipping to a new recent low but above October’s low at 113.62. CHF/JPY, GBP/JPY, KRW/JPY and IDR/JPY have dipped below their equivalent October lows, as have some equity indices. We feel there is more downside to come over the next five or ten days.
Strategy: Attempt shorts at 119.00, adding to 120.00; stop well above 122.00. First target 117.00 then today’s low at 116.45 and 115.50 where consolidation is likely.
GBP
Comment: Clinging precariously above Thursday’s low at 1.4560 within the downward-sloping ‘wedge’ formation. Extreme caution is warranted as one-month at-the-money implied volatility is still very high and the chance of a ‘false break’ or some other surprising move is high.
Strategy: Attempt tiny longs at 1.4850; stop below 1.4500. First target 1.5000 then 1.5200.
JPY
Comment: Dipping to a new recent low at 93.53, but ahead of October’s low at 90.90, and expect more very nervous trading today. Unwinding of the ‘carry trade’ is not over yet and crumbs of hope in any industry or market will be seized by the desperate and cause unwarrantedly large bounces because of the collapse of the last three months. One-month at-the-money implied volatility should remain high and may even increase towards month-end.
Strategy: Sell at 95.00, adding to 96.00; stop well above 96.25. First target 94.00, then 93.00, maybe 92.50/92.00.
