EUR
Comment: Retreating neatly from this year’s high at 1.4845, still clearly above the most recent Fibonacci retracement though below the nine-day average for the first time this month. Allow for more sideways work today noting that the Euro is on its way to becoming oversold.
Strategy: Attempt longs at 1.4590; stop below 1.4500. Short term target 1.4700.
EUR/JPY
Comment: Testing trendline support inside a very large weekly Ichimoku ‘cloud’. Slightly worrying that selling pressure was so very strong from the word ‘go’ today, threatening to create moves that spiral out of control. Note that the Euro is already very oversold against the Yen, and implied volatility should increase over the coming month.
Strategy: Attempt shorts at 130.20/130.70; stop well above 131.35. Add to shorts below 129.75 and again below 129.00 for 127.00.
GBP
Comment: Dropping below the ‘neckline’ of a ‘head-and-shoulders’ top but we warn against getting too carried away. The move is likely to be a short-lived correction lower. The question now is which of the three longer term Fibonacci retracement support levels will limit this drop. These lie between 1.5700 and 1.4850. Note that the move has been caused by sterling weakness caused by central bank comments as well as fears over the banking system and its long term outlook. Almost record futures volume suggest frenzied speculation by private investors.
Strategy: Do nothing. Possibly try and trade the range between 1.5700 and 1.6000.
JPY
Comment: Plummeting to the lowest since January’s low at 87.10 following Friday’s close below 90.00. Momentum should remain bearish, and we can look forward to a series of downside tests of critical support between 87.00 and 85.00, while below 92.00. The US dollar is slightly oversold and at-the-money implied volatility should increase.
Strategy: Attempt shorts at 89.25; stop well above 90.50. Short term target 88.25/88.00 and then scarily lower still. Remember: the lower we go the greater the temptation to interfere.
