EUR
Comment: Little to add as we hover above the ‘neckline’ of a potential ‘head-and-shoulders’, though proponents of this view may be getting a little frustrated. We remind that there is a high probability of this formation not going to plan as further out we see it as a process of trying to form a new interim low, probably somewhere between 1.3800 and 1.3600. This is expected to be a slow complex process ending an A, B, C-type correction which may take about two weeks.
Strategy: Possibly attempt small longs at 1.3940, adding to 1.3880; stop well below 1.3740. Short term target 1.4050.
EUR/JPY
Comment: Hovering in the middle of the broad range established in March this year and trying to cling to the 26-day moving average. We shall continue to allow for yet more hesitation around here today. Next week we shall allow for a test of the Ichimoku ‘cloud’.
Strategy: Attempt small shorts at 133.65 but only if prepared to add to 134.50; stop above 136.00. Short term target 132.55, maybe 131.70.
GBP
Comment: Holding surprisingly neatly above the 9-day moving average keeping open the possibility a re-test of this month’s high at 1.6664 possibly as early as the end of this week. Several other major currencies are behaving in a similar way lending support to our view that we are currently in the process of trying to form a new interim low and more generalised US dollar weakness in Q3.
Strategy: Strategy: Attempt small longs at 1.6385; stop well below 1.6200. First target 1.6500, then 1.6600 and more long term.
JPY
Comment: Dropping to 95.65, as expected, and will probably try and hover uneasily around here today. The risk of a sudden drop has increased because of stock market weakness coinciding with month and quarter-end, potentially leading to a Pavlov’s dog type reaction to buy Yen as they learnt in 2008. Caution is warranted.
Strategy: Possibly attempt small shorts at 96.00 but only if prepared to add to 97.00; stop above 97.65. First target 95.65/95.50, re-selling on a sustained break below here for 94.00.
