10
0
Weekly Technical Commentary
Mon, Dec 15 2008, 11:07 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 90.00..89.00..88.10..85.00.
Resistance 92.00..93.00..94.00..96.00
Sliding dramatically to the lowest price since 1995 at 88.10. Subsequent price action, with gaps and a tremendous bounce, hint at potential intervention (or at least the very real worry that they might step in). Therefore we feel that we shall hold above 89.00 until year-end. Note that the all-time low was 79.70 in April 1995 but for most of that month and the next two JPY held above 85.00 much of the time before rallying well clear of this area. As for rallies, these are likely to be subdued and cautious, the very large Ichimoku ‘cloud’ maintaining downside pressure throughout January. Some time in Q1 2009 we expect further concerted downside testing, grinding lower slowly.
EUR/USD
Chart Levels:
Support 1.3350..1.3250..1.3100..1.2900.
Resistance 1.3500..1.3600..1.3800..1.3915.
Getting a little more interesting as at last break we out of the all too neat ‘triangle’ that has held since October. The sooner we break above the very thick Ichimoku ‘cloud’ and 50% retracement at 1.3600 the more quickly bullish momentum should build. Likewise if we hold above 1.3250. The Euro is likely to continue to strengthen against a whole series of other European currencies. One-month at-the-money implied volatility is likely to pick up to the 24.00% area, especially in very thin year-end conditions. This could result in a rush to the 1.4000/1.4100 level by very early January, surprising many who have been lulled into a false sense of security by November’s range.
EUR/JPY
Chart Levels:
Support 120.00..119.30..117.75..116.00.
Resistance 123.00..126.25..127.25..128.45.
Getting a lot more difficult as we push into the apex of the right-angled ‘triangle’ that has dominated since October. Rather than an immediate move lower we have adjusted our view for sideways random and messy moves until year-end. Note that the very large Ichimoku ‘cloud’ continues to see its lower edge drop steadily and ought to bear down on prices during January as another wave of carry-trade unwinding is forced on tired investors. Peripheral currencies and asset classes will be sold at any price in order to prop up core central businesses, benefiting cash, Treasuries, the Yen and the US dollar. No doubt we will discover more ‘rogue traders’ and businesses clamouring to be bailed out.
GBP/JPY
Chart Levels:
Support 135.00..134.00..132.50..130.00.
Resistance 139.00..141.00..145.00..148.50.
We are at the apex of a downward-sloping ‘wedge’ formation (after the biggest ever quarterly loss) so whatever happens we will break the formation by moving sideways. We feel that Friday’s dip to a new multi-year low at 132.50 is some sort of ‘extension’ and that we ought to try and hold above 135.00 this week. Note that the huge Ichimoku ‘cloud’ bears down on this cross relentlessly through January so this is merely a temporary lull. We continue to allow for a drop to the 1995 all-time low at 128.20, possibly even further, in what would then be catastrophic financial conditions. In this case volatility here, and in a whole raft of other instruments and currencies, might hit new record highs.
GBP/USD
Chart Levels:
Support 1.4675..1.4560..1.4500..1.4470.
Resistance 1.5250..1.5535..1.5600..1.6000.
Lagging badly as on the Bank of England’s Trade Weighted index sterling drops to its weakest ever at 78.80. Cable is still very unstable as it consolidates in a downward-sloping ‘wedge’ formation, possibly with a ‘double bottom’ against the 1.4500 area. This is still seen as part of a long drawn-out process of forming an interim base, with an array of resistance levels likely to keep momentum bearish until year-end. One-month at-the-money implied volatility should hold above 18.00% and could rapidly rise to the 28.00% area on a sustained break above 1.5500. This should trigger a short squeeze to 1.6500 in a very short space of time mirroring the speed of the declines of late October.
EUR/GBP
Chart Levels:
Support 0.8760..0.8700..0.8580..0.8335.
Resistance 0.9000..0.9100..0.9250..0.9500.
The mass media are pointing out that with commissions and so on the Bureaux de Change are already exchanging a pound for just one Euro. November’s massive gyrations are not the norm for this currency pair yet we continue to work in Plan C, where we shall allow for massive swings roughly between 0.7800 and 0.9000 (equivalent to the all-time low GBP/DEM at 2.1750 of May 1995) for the next six months at least, possibly a whole year. Therefore plan for extreme volatility and price long-dated options accordingly. Note that while serious, it is not only the pound that has been singled out. Eastern European and some Scandinavian currencies have been hard hit and government bonds of some Eurozone countries likewise.
Download Full Weekly Technical Commentary 1
Published on Mon, Dec 15 2008, 11:07 GMT
13
0
Weekly Technical Commentary
Mon, Dec 1 2008, 11:35 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 93.93..93.53..92.48..91.88.
Resistance 96.00..97.44..98.70..99.50
Testing the lower edge of the ‘triangle’ though above November’s low at 93.53. Hopefully we will get a successful break this week and we continue to feel there is another downside move due by the end of this year as the ‘carry trade’ unwinds further and the credit crunch affects more areas of business. As for rallies, these will now hopefully be capped by the large Ichimoku ‘cloud’. These are seen as good selling opportunities for a subsequent drop back down to 92.00 and eventually below this year’s low at 90.87. The question is whether we get to this point this month or whether we must wait until Q1 2009. If we drop below here this month, there is a chance that one-month implied volatility could trade over 38.00%.
EUR/USD
Chart Levels:
Support 1.2600..1.2400..1.2329..1.2225.
Resistance 1.2700..1.2860..1.29251.3100.
A small short squeeze but still holding very much within the neat range above October’s low at 1.2329, below retracement resistance. It should remain trapped here for another week but some time in December we might see a brief (and scary) ‘extension’ lower. The Euro is likely to continue to strengthen against a whole series of other European currencies. Before that though we may have to live through a series of ‘false breaks’ as the market continues to try and put in an interim base, something it has struggled to do for the last five weeks. One-month at-the-money implied volatility has eased from the record high at 28.50% yet at 21.00% it is still more double the long run mean of 9.75% (which should put off some speculators).
EUR/JPY
Chart Levels:
Support 118.00..116.45..114.45..113.62.
Resistance 123.45..126.25..127.25..128.45.
Consolidation since late October is getting a little boring. Hopefully this month things will get going again as we continue to favour another sell-off, a continuation of the unwinding of the ‘carry trade’. The move might get going in earnest by mid-December as the very large Ichimoku ‘cloud’ bears down on prices. In the meantime we still cannot rule out another (hopefully final) upside probe to the 126.00/127.00 area, something which is seen as a good selling opportunity. Note that all Yen crosses are doing something similar, with Yen strength across the board being the issue. Peripheral currencies and asset classes will be sold at any price in order to prop up core central businesses.
GBP/JPY
Chart Levels:
Support 139.00..137.65..134.50..132.60.
Resistance 147.00..148.50..150.00..153.75.
A right-angled ‘triangle’ formation below a massive Ichimoku ‘cloud’ mean it is just a matter of time before we break lower. November’s monthly close below 150.00 signals a renewed downside attack which should take us down to the 1995 all-time low at 128.20, possibly even further, in what would then be catastrophic financial conditions. In this case volatility here, and in a whole raft of other instruments and currencies, might hit new record highs. As has been the case since July 2007, we feel that GBP/JPY is leading the way lower, the unwinding of the ‘carry trade’ coupled with the peculiarities of non-core currencies. Rate differentials will matter less as many countries consider zero interest rate policies.
GBP/USD
Chart Levels:
Support 1.5000..1.4700..1.4560..1.4470.
Resistance 1.5250..1.5535..1.5600..1.6000.
Still very unstable as we consolidate in a downward-sloping ‘wedge’ formation, a mirror image of the Dollar Index futures contract. This is seen as part of a long drawn-out process of forming an interim base. The monthly candle has an almost ten cent bounce from November’s low to the closing price, not a mean feat but still not enough to mark a low point. Possibly in holiday-thin markets this month we shall see an ‘extension’ below 1.4560, which might take one-month at-the-money implied volatility back up to this year’s high at 29.45%, in turn its highest in decades. Britain plc’s economic situation is probably not much worse nor any better than many countries; it’s problem is that it is not core G7.
EUR/GBP
Chart Levels:
Support 0.8300..0.8225..0.8175..0.8060.
Resistance 0.8435..0.8570..0.8675..0.8750.
November’s massive gyrations are not the norm for this currency pair so no wonder one-month at-the-money implied volatility remains close to record high (23.90%). We continue to work in Plan C, where we shall allow for massive swings roughly between 0.7800 and 0.9000 (equivalent to the all-time low GBP/DEM at 2.1750 of May 1995) for the next six months at least, possibly a whole year. Therefore plan for extreme volatility and price long-dated options accordingly. Note that while serious, it is not only the pound that has been singled out. Eastern European and some Scandinavian currencies have also been hard hit as money is moved out of ‘riskier’ assets to prop up rotting core business arms.
Published on Mon, Dec 1 2008, 11:35 GMT
14
0
Weekly Technical Commentary
Mon, Nov 24 2008, 12:03 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 94.48..93.53..92.48..91.88.
Resistance 97.00..98.50..99.50..100.55
Little to add as we continue in a holding pattern, ‘triangle’ consolidation below retracement resistance. We continue to feel there is another downside move due by the end of this year as the ‘carry trade’ unwinds further and the credit crunch affects more areas of business. As for rallies, these now will hopefully be capped between 98.00 and 100.00, although a brief but dramatic squeeze to 103.00 still cannot be ruled out completely. These are seen as good selling opportunities for a subsequent drop back down to 92.00 and eventually below this year’s low at 90.87. This should keep one-month at-the-money implied volatility below October’s record high of 43.50%, probably swinging between 20.00% and 32.00% for another few weeks.
EUR/USD
Chart Levels:
Support 1.2400..1.2329..1.2225..1.2000.
Resistance 1.2700..1.2860..1.29251.3100.
A most extraordinary chart pattern as the Euro clings to the lower edge of the ‘triangle’ above October’s low at 1.2329. It is almost too neat, possibly hinting at an attempt to manipulate its value. Nevertheless we still favour a slow rally back up to 1.3000 and then through here to the 1.3300 area where more consolidation should take place. The Euro is likely to continue to strengthen against a whole series of other European currencies. Before that though we may have to live through a series of ‘false breaks’ as the market looks for direction. One-month at-the-money implied volatility has eased from the record high at 28.50% yet at 20.00% it is still more double the long run mean of 9.75% (which should put off some speculators).
EUR/JPY
Chart Levels:
Support 117.65..116.45..114.45..113.62.
Resistance 122.25..126.00..128.50..131.05.
Like dollar/Yen this currency pair is holding in a consolidation pattern and there is little to add since last week. This should eventually lead to another sell-off, a continuation of the unwinding of the ‘carry trade’. The move might start in holiday-thin markets this week, and should have got going in earnest by mid-December. In the meantime we still cannot rule out another initial upside probe, probably no higher than the 127.00 area, something which is seen as a good selling opportunity. Note that all Yen crosses are seeing similar moves and patterns, BRL/JPY, CHF/JPY and IDR/JPY having dipped to new recent lows already last week. These are seen to be leading the way to Yen strength and other Yen crosses should follow.
GBP/JPY
Chart Levels:
Support 139.00..137.65..134.50..132.60.
Resistance 143.70..144.75..148.00..152.75.
Dipping to a new recent low at 137.65, just below October’s low at 139.00, and it should try and hold above here early this week. A monthly close below 150.00 should signal a renewed downside attack which should take us down to the 1995 all-time low at 128.20, possibly even further, in what would then be catastrophic financial conditions. In this case volatility here, and in a whole raft of other instruments and currencies, might hit new record highs. As has been the case since July 2007, we feel that GBP/JPY is leading the way lower, the unwinding of the ‘carry trade’ coupled with the peculiarities of non-core currencies. Interest rate differentials will matter less and less as many countries consider zero interest rates.
GBP/USD
Chart Levels:
Support 1.4700..1.4645..1.4560..1.4470.
Resistance 1.5100..1.5250..1.5600..1.6000.
Still working in a downward-sloping ‘wedge’ formation, a mirror image of the Dollar Index futures contract. This highly unstable pattern, following the catastrophic collapse of the last four months, suggests a reversal is imminent. Possibly in holiday-thin markets this week, and probably in even thinner markets by mid-December, Cable should attempt a rally back up to 1.6000, maybe 1.6500. All well and good but seeing as we were trading over 2.0000 in July, this would represent just a 38% corrective bounce. Interesting to note how some Eurozone currencies have been sold heavily, while the Treasury bonds of some EZ15 countries have been sold instead.
EUR/GBP
Chart Levels:
Support 0.8400..0.8333..0.8300..0.8200.
Resistance 0.8500..0.8600..0.8675..0.8750.
Consolidating slightly unsteadily below the record high at 0.8675. Similarly one-month at-the-money implied volatility has eased from a record high at 23.90%, over three times the mean at 7.00%, to 18.50%. We continue to work in Plan C, where we shall allow for massive swings roughly between 0.7800 and 0.9000 (equivalent to the all-time low GBP/DEM at 2.1750 of May 1995) for the next six months at least, possibly a whole year. Note that while serious, it is not only the pound that has been singled out. Eastern European and some Scandinavian currencies have also been hard hit as money is moved out of ‘riskier’ or peripheral assets to prop up rotting core business models.
Published on Mon, Nov 24 2008, 12:03 GMT
22
0
Weekly Technical Commentary
Mon, Nov 17 2008, 11:14 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 95.87..94.48..92.48..91.88.
Resistance 98.45..99.79..100.56..101.55
Still in a holding pattern, ‘triangle’ consolidation below retracement resistance. We continue to feel there is another downside move due by the end of this year as the ‘carry trade’ unwinds further and the credit crunch affects more areas of business and daily life. As for rallies, these ought to be capped between 99.00 and 101.00, although a brief but dramatic squeeze to 103.00 cannot be ruled out just yet. These are seen as good selling opportunities for a subsequent drop back down to 95.00 and eventually below this year’s low at 90.87. This should keep one-month at-the-money implied volatility below October’s record high of 43.50%, probably swinging between 20.00% and 32.00% for another few weeks before dropping at year-end.
EUR/USD
Chart Levels:
Support 1.2500..1.2400..1.2329..1.2225.
Resistance 1.2860..1.3000..1.3120..1.3300.
Clinging to the lower edge of the ‘triangle’ above October’s low at 1.2329. We expect a slow rally back up to 1.3000 and then through here to the 1.3300 area where more consolidation should take place. One-month at-the-money implied volatility has eased from the record high at 28.50% yet at 22.00% it is still more than double the long run mean of 9.75% (which should put off some speculators). The Euro is still oversold and bearish momentum has eased from October’s record. We favour more subdued trading in November but warn that financial conditions might deteriorate very dramatically before year-end. We warn against complacency and potential ‘false breaks’.
EUR/JPY
Chart Levels:
Support 120.00..117.65..116.00..113.62.
Resistance 126.00..128.50..131.05..135.00.
Like dollar/Yen and Euro/dollar, this currency pair is holding in a consolidation pattern after plummeting like a stone the previous three months. While very dramatic, this was the start and not the end of the reversal of the rally that originally started late in 2000. Therefore the long term trend is for yet more Yen strength against a whole raft of other currencies. Moves should be a lot slower and steadier, but be careful at year-end when the desperate may have to slash and burn positions again to raise money to square up books. We shall continue to allow for a re-test of the recent high at 131.05 and cannot rule out a brief but surprising (to many) squeeze towards the 135.00 area. This is seen as a good selling opportunity.
GBP/JPY
Chart Levels:
Support 140.00..139.00..138.00..134.50.
Resistance 150.00..157.50..165.00..175.00.
Hard to believe but Sterling has lost 53.5% of its value against the Yen so far this year, 33.0% against the US dollar, and not a peep from the authorities up until this weekend (warning that a run on the currency was a possibility some time in the future!) Last week’s dip below October’s low at 139.00 to 138.85 looks like a step too far and the cross should hold above here this week and probably until month-end. A monthly close below 150.00 should signal a renewed downside attack which should take us down to the 1995 all-time low at 128.20, possibly even further, in what would then be catastrophic financial conditions. In this case volatility here, and in a whole raft of other instruments and currencies, might hit new record highs.
GBP/USD
Chart Levels:
Support 1.4645..1.4560..1.4470..1.4340.
Resistance 1.5000..1.5260..1.6000..1.6675.
Record bearish momentum, record one-month at-the-money implied volatility at 29.45%, a record quarterly drop (and we still have over a month to go!)…and the authorities continue to look the other way. ‘Benign neglect’ on an unprecedented scale and still very oversold. This year Sterling has weakened against all major currencies except the South African rand and South Korean won (and even then only just). On the Bank of England’s trade weighted basis it has matched it all-time weakest of November 1995 with an astonishing 10% decline on this index so far this month. Moves on this scale will go a long way to shrinking debt and robbing savings. Who do they think they are kidding?
EUR/GBP
Chart Levels:
Support 0.8475..0.8300..0.8200..0.8050.
Resistance 0.8565..0.8675..0.8750..0.9000.
The very thick Ichimoku weekly ‘cloud’ we had warned of helped propel the Euro to a record high against the pound at 0.8675. This has seen one-month at-the-money implied volatility set a new record high at 23.90%, over three times the mean at 7.00%, and double the two-standard deviation point of 11.50%. These sort of moves are more usually associated with banana republics and not a G7 country, let alone one who’s PM thinks he can lead the way out of the economic mire. We have been forced to move onto Plan C, where we shall allow for massive swings roughly between 0.7800 and 0.9000 (equivalent to the all-time low GBP/DEM at 2.1750 of May 1995) for the next six months at least, possibly a whole year.
Published on Mon, Nov 17 2008, 11:14 GMT
20
0
Weekly Technical Commentary
Tue, Nov 11 2008, 05:59 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 97.90..96.75..95.95..94.25.
Resistance 99.79..100.56..101.55..102.15
Little to add as we continue in correction and consolidation mode, here and in all variants of the ‘carry trade’. This may continue for another week and possibly for most of November. However, we warn against complacency because we feel there is another downside move due by the end of this year. As for rallies, these ought to be capped between 102.00 and 103.00 and are seen as good selling opportunities for a subsequent drop back down to 95.00 and eventually below this year’s low at 90.87. This should keep one-month at-the-money implied volatility below October’s record high of 43.50%, probably swinging between 15.00% and 25.00% for much of the coming month.
EUR/USD
Chart Levels:
Support 1.2650..1.2525..1.2329..1.2225.
Resistance 1.3000..1.3300..1.3400..1.3600.
Consolidating in a ‘triangle’ above the recent low at 1.2329 and should try to hold above here again this week. We expect a slow rally back up to 1.3300 and then through here to the 1.3600 area where more serious consolidation should take place. One-month at-the-money implied volatility has eased from the record high at 28.50% yet at 20.00% it is still more than double the long run mean of 9.75%. The Euro is less oversold and bearish momentum has eased considerably. We favour more subdued trading in November but warn that financial conditions might deteriorate very dramatically through the year-end. If this is the case unwinding of the ‘carry trade’, and a flight into Yen and US dollars, should resume.
EUR/JPY
Chart Levels:
Support 124.65..122.00..116.00..113.62.
Resistance 128.50..131.05..135.00..138.50.
Consolidating in a neat little band well above October’s low at 113.62 and should hold above the 114.00 area all month. Rallies are corrective in nature and we favour more declines over the next year or more. In other words, the long term trend is for yet more Yen strength despite the massive moves of the last three months. These ought to be a lot slower and steadier, but be careful at year-end when the desperate may have to slash and burn positions again to raise money to square up books if their financial year-end happens to be the 31st December. At the moment we favour a squeeze through the recent high at 131.05 to the 136.00 area and possibly all the way up to 140.00 if enough bullish momentum builds.
GBP/JPY
Chart Levels:
Support 155.00..150.25..148.85..142.80.
Resistance 160.00..162.30..165.00..175.00.
Working in a ‘flag’ formation well above October’s low at 139.00. Because of the size of recent moves, both down and now up, one-month at-the-money implied volatility remains high at 33.65%, well above the long-run average at 10.80%. We shall continue to favour a squeeze through the recent high at 165.00 to 175.00 and probably no higher than 179.00. A monthly close below 150.00 forces us to review, signalling a renewed downside attack which should take us down to the 1995 all-time low at 128.20, possibly even further, in what would then be catastrophic financial conditions. In this case volatility here, and in a whole raft of other instruments as well as currencies, might hit new record highs.
GBP/USD
Chart Levels:
Support 1.5600..1.5535..1.5260..1.5160.
Resistance 1.6200..1.6400..1.6655..1.7000.
On the Bank of England’s Trade Weighted Index sterling is at its weakest since September 1996 while Cable consolidates in a ‘triangle’ barely above this year’s low at 1.5260. One-month at-the-money implied volatility at 22.00% is only just below last week’s staggering peak at 29.45%. Cable is somewhat oversold and bearish momentum is still incredibly strong. We shall allow for a squeeze up to 1.6400 this week, possibly 1.7000 where many will start panicking, followed by a series of sudden random fairly big swings between roughly 1.5600 and 1.7000 until month-end. A weekly close above 1.7500 would ease downside pressure considerably but only above October’s high at 1.7878 does the outlook for Cable improve significantly.
EUR/GBP
Chart Levels:
Support 0.8000..0.7900..0.7800..0.7695.
Resistance 0.8204..0.8240..0.8300..0.8365.
The chattering classes are talking of parity as we probe the upper edge of a potential ‘broadening top’ formation. The very big Ichimoku weekly ‘cloud’ has helped move it up here over the last three weeks and it may limit the downside well into Q2 2009. This type of price action is typical of a market looking for direction which explains why one-month at-the-money implied volatility remains so high at 16.25%. So long as we do not get a weekly close clearly above 0.8200 we shall continue to watch for signs of topping. If we break above 0.8200 we would be forced to move into Plan C, with massive swings roughly between 0.7800 and 0.8500 for the next six months at least, possibly a whole year.
Published on Tue, Nov 11 2008, 05:59 GMT
25
0
Weekly Technical Commentary
Mon, Nov 3 2008, 11:16 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 97.90..95.95..94.25..92.50.
Resistance 99.79..101.55..102.15..103.00
Many breathing a sigh of relief as markets move into correction and consolidation mode, here and in all variants of the ‘carry trade’. This should continue this week, maybe for most of November. However, we warn against complacency because we feel there is another downside move due by the end of this year. As for rallies, these ought to be capped between 102.00 and 103.00 and are seen as good selling opportunities for a subsequent drop back down to 95.00 and eventually below this year’s low at 90.87. This should keep one-month at-the-money implied volatility below October’s record high of 43.50%, probably swinging between 15.00% and 25.00% for much of the coming month.
EUR/USD
Chart Levels:
Support 1.2665..1.2395..1.2329..1.2225.
Resistance 1.3000..1.3300..1.3400..1.3700.
Bouncing cautiously from a recent low at 1.2329 and likely to hold above here again this week. We expect a slow rally back up to last week’s high at 1.3300 and then through here to the 1.3700 area where more serious consolidation should take place. One-month at-the-money implied volatility has eased only marginally from the record high at 28.50%, and should slowly drop back to the 16.00% area over the coming month. The Euro is still oversold and momentum is bearish, although a lot less so than at 10th October’s record. We favour very much more subdued trading in November after October’s massive monthly range, losing ground against Eastern European currencies which should recover some more this month.
EUR/JPY
Chart Levels:
Support 124.65..121.40..116.00..113.62.
Resistance 128.50..131.05..135.00..138.50.
Bouncing well from October’s low at 113.62 and should hold above the 114.00 area all month. Rallies are corrective in nature and we favour more declines over the next year or more. In other words, the long term trend is for yet more Yen strength despite the massive moves of the last three months. These ought to be a lot slower and steadier, but be careful at year-end when the desperate may have to slash and burn positions again to raise money to square up books if their financial year-end happens to be the 31st December. At the moment we favour a squeeze through last week’s high at 131.05 to the 136.00 area and possibly all the way up to 140.00 if enough bullish momentum builds.
GBP/JPY
Chart Levels:
Support 158.00..156.00..153.00..148.00.
Resistance 165.00..168.00..175.50..179.00.
Bouncing strongly from October’s low at 139.00, below the September 2000 low at 148.00, and shy of the all-time low at 128.20 set in April 1995. Because of the size of recent moves, both down and now up, one-month at-the-money implied volatility remains at a record 44.25%. The collapse of the last five quarters is similar in size and price levels to that of 1992, which then led to a sideways band between 145.00 and 170.00 for another 15 months. Something similar is possible, with the upside less clear and therefore the potential to squeeze through 175.00 to a high around 179.00. As we move into a trading band, volatility should ease slowly but considerably. A monthly close below 150.00 forces us to review.
GBP/USD
Chart Levels:
Support 1.6000..1.5560..1.5260..1.5160.
Resistance 1.6400..1.6675..1.7000..1.7400.
Bouncing from a low at 1.5260, ahead of super-long channel support, after Cable’s biggest kicking since 1992; bearish momentum is at its strongest since then. One-month at-the-money implied volatility is trading only just below last week’s staggering peak at 29.45%. Cable is still oversold and GBP/CHF touched 1.7595, almost matching its record low of 1.7515 of December 1995. During this week, and maybe the following one too, we favour a series of sudden random fairly big swings between roughly 1.5600 and 1.7000. A weekly close above 1.7500 would ease downside pressure considerably but only above October’s high at 1.7878 does the outlook for Cable improve significantly.
EUR/GBP
Chart Levels:
Support 0.7840..0.7800..0.7695..0.7555.
Resistance 0.8000..0.8100..0.8187..0.8197.
Nasty with increasingly sharp moves either side of 0.7900 in what we still see as a potential ‘broadening top’ with the latest rally the third attempt at the top of the pattern. This type of price action is typical of a market looking for direction. So long as we do not get a weekly close clearly above 0.8200 we shall maintain this view, favouring an initial decline towards 0.7400 and then many sharp moves probably between 0.8000 and 0.7300. At-the-money implied volatility hit 19.15%, a record high and way above the May 2000 high at 14.25%. This in turn is way above the mean of 6.00% of the last six years, no doubt doing untold damage to option traders’ books. Over the coming month it should ease back to the 10.00% area.
Published on Mon, Nov 3 2008, 11:16 GMT
31
0
Weekly Technical Commentary
Tue, Oct 28 2008, 06:07 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 91.88..90.87..89.20..87.75.
Resistance 95.00..97.00..101.00..103.00
The biggest weekly and monthly move in this currency pair since October 1998, again caused by de-leveraging; record one-month volatility at 38.90%. Surprisingly little said by Japanese authorities, in contrast to aggressive intervention in 2000/2001. Bearish momentum is stronger than anything since July 2002 as we approach the strongest ever level for the Yen against the dollar set in April 1995 at 79.70. Friday’s low at 90.87 is holding this morning but we would not pin too much hope on this continuing all week. Yen crosses, EUR/CHF, and all other variations of the ‘carry trade’ are in free-fall. Instruments that are liquid are being sold at any price, even quality things, to raise working capital and stave off bankruptcy.
EUR/USD
Chart Levels:
Support 1.2400..1.2335..1.2225..1.2100.
Resistance 1.2700..1.2940..1.3000..1.3370.
Trashed as firms repatriate anything they can liquidate and we worry about Eastern Europe sliding off a cliff. The long term implications for the Euro are unknown and serious, many relishing in the prospect of a possible end to the single currency. Giving up almost half the gains from the all-time low at 0.8228 in October 2000 to the all-time high at 1.6040 in July this year (hard to believe we have come this far in less than four months), suffering the biggest weekly, monthly and quarterly falls ever. The authorities silent and powerless to deal with the financial chaos they have aided and abetted. The taxpayer is rightly concerned for his and her future, whatever help this will give to exporters.
EUR/JPY
Chart Levels:
Support 113.62..112.00..111.30..110.00.
Resistance 119.50..122.00..125.00..131.50.
The Yen has gained against all currencies this year, a staggering 35.00% against the South African rand this month alone, 46.00% in 2008 versus the South Korean won, and to a record 55.11 to the Australian dollar. Against the Euro this month’s collapse has been even bigger than that of October 1998, a staggering 37 Yen so far and we still have another week to get through. Record one-month at-the-money implied volatility of 32.13% and record bearish momentum. The trade off this week will be the extent to which yet more ‘carry trade’ unwinding is needed versus an instrument that has become too expensive to touch. Desperate times mean terrible consequences. Never again will many be tempted to fund in ‘cheap’ Yen.
GBP/JPY
Chart Levels:
Support 140.00..139.00..134.65..131.00.
Resistance 150.00..155.00..160.00..165.00.
Possibly the biggest monthly move on record, 51 Yen and dropping below the 2000 low, a little shy of the all-time low at 128.20 set in April 1995. One-month at-the-money implied volatility has set a new record at 36.75% and it is more oversold than at any point in the last twenty years. It might be tempting to say, ‘enough is enough’ but record bearish momentum makes this a scary prospect. Over the coming month we feel this pair should try and stabilise and establish a new if wide trading band. The collapse of the last five quarters is similar in size and price levels to that of 1992, which then led to a sideways bend between 145.00 and 170.00 for another 15 months. Something similar is possible.
GBP/USD
Chart Levels:
Support 1.5260..1.5160..1.5000..1.4750.
Resistance 1.5875..1.6000..1.6500..1.7000.
Tumbling with the biggest two consecutive quarter loss since 1992, and on the Bank of England’s Trade Weighted basis to its weakest since October 1996. One-month at-the-money implied volatility reached a staggering 24.75% and still not a peep from the authorities. Cable is terribly oversold and GBP/CHF is almost at its record low of 1.7515. It is terribly oversold and moves of this magnitude are not sustainable, but would you run to the rescue? Doubtful so the slide will be allowed to run its course. Watch for possible signs of basing at the psychological 1.5000 area. Lows in 1996 and 1992 were around 1.4900; in 2001 1.3682 although it held over 1.4000 most of the time that year.
EUR/GBP
Chart Levels:
Support 0.7900..0.7800..0.7695..0.7555.
Resistance 0.8070..0.8100..0.8187..0.8197.
Shooting quickly back up towards 0.8200 as the authorities are accused of benign neglect. We remain under the equivalent all-time high of 0.8480 set in 1995. The pattern could still be a ‘broadening top’ with the latest rally the third attempt at the top of the pattern. So long as we do not get a weekly close clearly above 0.8200 we shall maintain this view, favouring an initial decline towards 0.7400 and then many sharp moves probably between 0.8000 and 0.7300. Note that other currencies have suffered a lot more this month, mainly emerging market ones, with the South African rand down 13.60% and the Australian dollar shrinking 10.70% versus Sterling. At-the-money implied volatility over 15.00% the highest in years.
Published on Tue, Oct 28 2008, 06:07 GMT
0
0
Weekly Technical Commentary
Tue, Oct 21 2008, 06:06 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 100.60..99.25..98.60..95.77.
Resistance 102.50..103.30..104.50..105.00
Price action last week is seen as consolidation at some of the lowest levels this year, below the fairly pivotal 102.50 area, as we get to grips with the rather scary concept of the US dollar being worth less than 100 Yen. This process should continue this week, maybe until the end of this month, prior to a re-test of March’s low at 95.77. Therefore rallies to 103.00/104.50 are seen as selling opportunities. This is part of a global move to unwind ‘leverage’ in all its many guises, and where some companies are forced to sell the ‘family silver’ in order to stave off immediate bankruptcy. There is more to come so we continue to see Japan plc as a relative ‘safe haven’ in a sea of chaos.
EUR/USD
Chart Levels:
Support 1.3400..1.3345..1.3255..1.3100.
Resistance 1.3600..1.3800..1.3915..1.4040.
We completely underestimated the need for US banks, funds and corporates to re-capitalise and repatriate all forms of non-dollar holdings to shore up creaking edifices at home. Adding to the woe is the realisation by Eurozone citizens that their financial institutions are not immune to the global meltdown and are perhaps more vulnerable than UK ones because of the many central banks involved. The Euro, having given up 61% of the gains versus the USD since late 2005, 50% on the ECB’s Effective Exchange Rate, we still feel it should try and base at current levels. Attempts so far have been a joke. Let’s see if it can try a bit harder this week and between now and month-end.
EUR/JPY
Chart Levels:
Support 136.00..134.75..134.00..132.15.
Resistance 138.50..139.70..141.00..141.75.
While lower than last week’s record 28.00%, one-month at-the-money implied volatility at 23.25% remains very high indeed. Last week the cross consolidated in a ‘triangle’ continuation pattern, which could also be seen as an inverted ‘pennant’. The terribly oversold condition has eased a little while keeping bearish pressure very strong indeed. This should allow traders and investors to get used to these new lower levels, having already given up almost 50% of the rally since 2001. We are in a new long term trend of Yen strength against other majors, one by one they should move lower and drag each other down. Note that some Yen crosses are already trading at extreme levels, KRW/JPY at its lowest since the 1998/1999 Asia crisis.
GBP/JPY
Chart Levels:
Support 175.25..173.00..168.60..165.95.
Resistance 186.00..190.00..195.00..197.50.
Consolidating above this month’s low at 165.95 and should continue to do so for another week or three. Rallies so far have held well below the fairly pivotal 190.00 so that the move lower is formed of large steps down. Corrective bounces shop stop short of the 26-day average at 191.00 and are seen as selling opportunities for another step down later this quarter. One-month at-the-money implied volatility has retreated considerably from a record 33.25% and should hold below here for quite some time. Our medium term target of an ‘extension’ to 165.00 has been met so GBP/JPY should drop by less than some other currencies. Those with the highest interest rate differentials are the ones likely to see the biggest losses.
GBP/USD
Chart Levels:
Support 1.7300..1.7135..1.7065..1.6781.
Resistance 1.7520..1.7660..1.7840..1.7975.
One-month at-the-money implied volatility at 16.00% is admittedly a lot lower than the 21.12% peak last week, but remains terribly high as compared to the last 20 years. This is not ‘normality’ returning, just a breather in among the chaos. Having clawed its way up from a low at 1.6781 Cable is not as oversold as some might think and bearish momentum is lower than it has been since mid-August. Watch for cautious basing activity this week maintaining very cautious trading strategies for at least another two weeks. Investors have realised that the UK is not the only place with a ropey finance industry so Sterling has begun to claw back the one-off loss suffered from July last year. This trend should continue.
EUR/GBP
Chart Levels:
Support 0.7690..0.7650..0.7595..0.7555.
Resistance 0.7795..0.7860..0.7900..0.8025.
One-month at-the-money implied volatility hit 13.55%, just below the 2000 peak at 14.00%. It is expected to swing sharply between 12.50% and 8.50% until year-end. Today the pound dipped below £0.7700 to the Euro, its strongest since March, and looks as though further moves down might be hampered by a very thick Ichimoku ‘cloud’. Long term we favour many large swings roughly between 0.8000 and 0.7300, with swings being limited to trading inside the Ichimoku ‘cloud’ most but not all of the time. Very much a trader’s market. On the Bank of England’s Index while regaining composure, it still has a bit more to do before we can see our way out of the woods.
Published on Tue, Oct 21 2008, 06:06 GMT
0
0
Weekly Technical Commentary
Mon, Oct 6 2008, 12:29 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 102.50..101.45..100.00..98.00.
Resistance 104.00..105.15..106.00..107.15
The Yen, and Japan plc generally, are seen as a safe-haven in the gathering storm. Counterparty risk is key as we become ever more reluctant to do any type of business with anybody. Wider bid-offer spreads and implied volatility close to record highs make doing business more expensive and difficult. The disjointed and slow response by the authorities is adding to woes. The implosion of leverage has further to go, desperate repatriation and reversion to core markets the symptoms, and unfortunately there is precious little money available outside the immediate banking system. This is likely to get worse, not better. Buy Yen and Yen crosses.
EUR/USD
Chart Levels:
Support 1.3540..1.3450..1.3360..1.3265.
Resistance 1.3700..1.3800..1.3915..1.4040.
We have completely underestimated the need for US banks and funds to repatriate all forms of non-dollar holdings to shore up creaking edifices at home. Adding to the woe is the realisation of Eurozone citizens that their financial institutions are not immune to the global meltdown. One wonders where they will choose to squirrel away their savings. In the meantime one-month at-the-money implied volatility is at a record 17.75% and the Euro has lost 15 cents in twelve weeks. Ouch! We expect this clear-out, which takes the shape of an A, B, C-type formation, to end imminently between 1.3550 and 1.3360. Allow for an ‘extension’, here and in many other instruments, as chaos reigns.
EUR/JPY
Chart Levels:
Support 140.00..139.00..137.00..135.00.
Resistance 142.00..144.50..146.00..150.50.
Yen crosses are (mercifully) going to plan, breaking pivotal long term support. The South Korean won continues to lead the way, closely followed by AUD/JPY and NZD/JPY. This is another version of the unwinding of ‘carry trades’ and also possibly a flight to relative safety seeing as Japan had its banking crisis some years ago (and lived to tell the tale). Over the next few months we expect EUR/JPY to drop to the 130.00 area, in an out and out rout, so that one-month at-the-money implied volatility could match its 1999 record of 23.00%. This is seen as just the first leg in a series of moves lower, a new long term trend of Yen strength against other majors, erasing much of the rally from 2000.
GBP/JPY
Chart Levels:
Support 180.75..180.00..179.00..176.75.
Resistance 186.00..190.00..195.00..197.50.
Trading down even faster than we had imagined as all Yen crosses are hit hard. Now worth just over 180.00 Yen per pound, the cross is at its lowest since November 2003. One-month at-the-money implied volatility has matched its 1998 peak at 24.00%. We feel the move should slow a little here at the 180.00 area, allowing other Yen crosses to catch up. Our medium term target remains at 175.00 with a good chance of an ‘extension’ to 165.00 before some semblance of order returns. Charts with patterns similar to this one are AUD/JPY, NOK/JPY and KRW/JPY. Note that the bulk of these moves ought to be due to Yen strength rather than catastrophic weakness of other major currencies.
GBP/USD
Chart Levels:
Support 1.7500..1.7445..1.7200..1.7000.
Resistance 1.7600..1.7700..1.8000..1.8100.
Holding up better than many, admittedly after one of the biggest quarterly sell-offs in history, as we re-assess Sterling’s vulnerability to the financial sector and the risk of moral hazard generally. One-month at-the-money implied volatility at 19.00% is at its highest in at least sixteen years and futures open interest is running at about half of last year’s peak. Extreme caution is warranted here, and in all financial markets, as moves will be vicious when the ‘price’ is not the issue but the need to ‘get out’ is all-important. The pound is not as oversold as some might think and bearish momentum has halved since mid-September. Watch for cautious basing activity this week and over the coming month.
EUR/GBP
Chart Levels:
Support 0.7700..0.7650..0.7595..0.7555.
Resistance 0.7760..0.7800..0.7900..0.8025.
Dropping to £0.7700, the pound’s strongest against the Euro since mid-March, as investors re-think the dangers of the credit crisis in Britain and abroad. The all-time high at £0.8187 looks like some sort of ‘false break’ or ‘spike high’ and on the Bank of England’s Trade Weighted Index the pound is trying to recover too, gaining against Scandinavian and Eastern European currencies. One-month at-the-money has leapt to 11.00%, still a way below the 2000 peak at 14.00%. This week it should hold below 0.7900, maybe even 0.7800, drifting to 0.7650 and maybe 0.7600 within the next week or so. Long term we favour many large swings roughly between 0.8100 and 0.7300.
Published on Mon, Oct 6 2008, 12:29 GMT
0
0
Weekly Technical Commentary
Mon, Sep 29 2008, 10:48 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 105.50..105.00..104.50..103.50.
Resistance 106.50..107.00..107.75..108.60
The finance industry is the eye of the storm, making front page news as one after another institutions fail or are rumoured to be failing. This morning we have not had even the tiniest relief rally as US politicians plan a $700B rescue package. Instead sellers are out in force, taking stock indices down to recent lows, and interbank money is non-existent as Q3 ends. Bid/offer spreads in all instruments are very much wider than they should be as we become more reluctant to do any type of business with any counterparty. The Yen maintains its safe-haven status, this aspect increasing in importance as the downward spiral exerts ever greater force on an ever wider set of participants. The authorities’ paralysis most unhelpful.
EUR/USD
Chart Levels:
Support 1.4300..1.4250..1.4150..1.4070.
Resistance 1.4560..1.4600..1.4765..1.4900.
A ‘spike high’ last week after the massive ‘spike low’ two weeks ago suggest this market is looking for direction in increasingly stressed conditions. Over the next month or so we still favour several sharp moves roughly between 1.4200 and 1.4900, keeping one-month at-the-money implied volatility capped around 15.00%. The Euro should continue to lag Eastern European currencies but gain over Scandinavian ones. It is currently oversold against the US dollar but a bout of consolidation should sort this out. We expect sharp intra-day moves as liquidity dries up and spreads get ever wider as participants become increasingly reluctant to deal with an ever wider range of investors.
EUR/JPY
Chart Levels:
Support 152.00..150.75..149.00..147.00.
Resistance 154.00..155.20..156.30..157.00.
Yen crosses should drop again to re-test pivotal long term support, if not this week then within the next month. The South Korean won is leading the way at the moment, dropping to a multi-year low against the Yen this morning. Over the next few months we expect EUR/JPY to drop to the 130.00 area, in what will hopefully be a steady trend rather than an out and out rout. If the latter were to be the case, one-month at-the-money implied volatility could match its 1999 record 20.00% (and three-month’s at 23.00%). This is seen as just the first leg in a series of moves lower, a new long term trend of Yen strength against other majors, erasing much of the rally from 2000.
GBP/JPY
Chart Levels:
Support 190.00..186.75..186.00..184.40.
Resistance 195.65..197.45..200.00..205.00.
Turning down from retracement resistance well ahead of the Ichimoku ‘cloud’ as investors re-think Japan’s economy and its financial system. Having suffered its own asset bubble, burst, and banking crisis several years ago lessons might be learnt. A sustained break below 186.00 next month confirms that the ultra-long term trend is to a stronger Yen. Our medium term target remains at 175.00 with a good chance of an ‘extension’ to 165.00 before some semblance of order returns. Charts with patterns similar to this one are AUD/JPY, NOK/JPY and NZD/JPY. Note that the bulk of these moves ought to be due to Yen strength rather than catastrophic weakness of other major currencies.
GBP/USD
Chart Levels:
Support 1.7900..1.7800..1.7500..1.7445.
Resistance 1.8200..1.8340..1.8672..1.8800.
A ‘spike high’ on the chart last week against the 9-week moving average and ahead of 38% retracement resistance from last year’s multi-year high. This suggests another week or three of fairly vicious price moves as Cable, and other currencies, look for direction. On the monthly candle we have on of the most massive ‘doji’ patterns ever, with a low at 1.7445 and a high of 1.8672, and a potentially tiny little ‘body’ between 1.8190 and tomorrow’s closing price. Watch also the quarterly charts tomorrow for further signs that the sell off since July is an aberration. One-month at-the-money implied volatility has retreated from a high at 13.00%, close to the 1995 peak of 13.80%, and should hold below here for a bit longer.
EUR/GBP
Chart Levels:
Support 0.7900..0.7850..0.7800..0.7745.
Resistance 0.8000..0.8050..0.8100..0.8187.
An oasis of relative calm as storms rage in many financial instruments, holding inside the range that has prevailed for most of the last five months. The monthly and quarterly candles, to be scrutinised Wednesday, add weight to our view that the all-time high at £0.8187 looks like some sort of ‘false break’ or ‘spike high’. We shall continue to allow for up to a year’s worth of sideways trading in a much broader band than that of Q2 2008. On the Bank of England’s Trade Weighted Index the pound is trying to recover too, gaining against Scandinavian and Eastern European currencies but lagging the Canadian dollar. This week it should hold below 0.8020, dipping to 0.7850 within the next few weeks.
Published on Mon, Sep 29 2008, 10:48 GMT
0
0
Weekly Technical Commentary
Mon, Sep 8 2008, 13:32 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 108.00..107.20..106.40..105.50.
Resistance 109.19..110.67..111.00..111.80
Once again the Ichimoku ‘cloud’ has done a splendid job in limiting sudden collapses. Because it is getting fatter over the coming month, and because the US dollar is fractionally oversold, we feel it should consolidate above 107.00 for another week or two. However, if at-the-money implied volatility remains high, we could find that ranges are riddled with ‘spikes’ and ‘extensions’ making it very hard to decide where to put orders. Daily and weekly closes below 108.00 should add some bearish pressure, while a break below 105.00 may send many into a flap as they are forced to deal with a complex, multi-layered FX situation. Note that all Yen crosses will be subject to similar problems.
EUR/USD
Chart Levels:
Support 1.4200..1.4165..1.4125..1.4015.
Resistance 1.4430..1.4545..1.4700..1.4815.
A pathetic attempt at basing against trendline and retracement support. In what is expected to be a slow process (note that we also based around here in Dec07/Jan08) nerves of steel will be required. The dramatic collapse of the last five weeks has taken us very much by surprise and has postponed the rally that we had targeted for late this year. Hopefully a thickening Ichimoku weekly ‘cloud’ coupled with the fact the Euro is still so very oversold should help it find its feet. The sudden alleged global embracing of the greenback looks suspect and price moves are probably caused by a massive clearout of stale positions rather than new ones being built. We urge extreme caution.
EUR/JPY
Chart Levels:
Support 153.60..152.00..150.60..150.00.
Resistance 157.00..158.00..160.00..163.15.
Tremendous moves as many belatedly pick up worrying signals in their radars; about timetoo! The bounce from Friday’s low at 150.50, and pivotal chart area, is very dramatic but nevertheless just a bounce. One-month at-the-money implied volatility exploded, as expected, and should stay relatively high all month. Only a weekly close below 152.00 completes a very major super-long term ‘rounded/triple top’ that started early 2007. We expect this some time this month, therefore all rallies are seen as good long term selling opportunities for more dramatic declines later this year. We urge readers to look at what happened to Yen crosses in 1997 and 1998 as that is the sort of thing we feel is due imminently.
GBP/JPY
Chart Levels:
Support 190.00..187.50..186.00..185.00.
Resistance 194.00..195.65..200.00..205.00.
Leading the way lower, dipping below March’s low at 192.50, but recovering somewhat late Friday. While the bounce was impressive, the weekly close at the lowest price since July 2005 should make many sit up and listen. We shall allow for a little consolidation at this point, allowing other Yen crosses to catch up a bit. One-month at-the-money implied volatility burst higher on these very sharp moves, as expected, but should subside towards 14.00% over the next week or two. A sustained break below 190.00 confirms that the new ultra-long term trend is to a stronger Yen against the pound, and who cares whether this is because of unwinding of the carry trade or for any other of a myriad different reasons.
GBP/USD
Chart Levels:
Support 1.7565..1.75355..1.7400..1.7000.
Resistance 1.7800..1.8000..1.8200..1.8400.
A complete disaster and the authorities look on and do nothing. Maybe that is for the best as when they do something it is an embarrassing tinkering around the edges at best, and at worst more digging at the graveside. We, possibly alone among analysts, not only feel the move is overdone but that US dollar strength is not something which will carry on for the rest of this year. The move though has forced us to postpone further dollar declines that we now expect in the middle of next year. Therefore we continue to wait until Cable bases before moving higher later this quarter. Today’s half-hearted attempt at a rally is very disappointing, especially as Cable is more oversold than anything seen since late 1982.
EUR/GBP
Chart Levels:
Support 0.8000..0.7965..0.7850..0.7745.
Resistance 0.8100..0.8187..0.8255..0.8400.
Last week’s small ‘spike high’ at a new all-time high for the Euro against the pound at £0.8187 suggests we will hold below here for another week or three. Having moved on to ‘Plan B’ last week we shall continue to allow for up to a year’s worth of sideways trading in a much broader band than that of Q2 2008. On the Bank of England’s Trade Weighted Index the pound is at its weakest since November 1996, when its weakest ever on this basis was February 1996. This week it should hold below 0.8100, dipping to 0.7965 and stabilising here before dropping towards 0.7800 next month. Then sideways in a very broad band of at least five pence, potentially with ‘spikes’ up to ten pence wide.
Published on Mon, Sep 8 2008, 13:32 GMT
0
0
Weekly Technical Commentary
Tue, Sep 2 2008, 08:22 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 107.20..106.40..105.75..105.00.
Resistance 109.90..110.67..111.00..111.80
August’s candle is an ‘evening/shooting star’ with the move above 110.00, an important long term pivotal area, being an ‘extension’. Over the next month or three we expect the Yen to gain against the US dollar, and for the Yen to gain against most if not all major currencies. Whether this is because of unwinding of the carry trade, or whether it is a flight to safety, we feel that the Swiss franc should do something similar and gain against the Euro. Daily and weekly closes below 108.00 should add a little bearish momentum, while a break below 105.00 may send many into a flap as they are forced to deal with a complex, multi-layered FX situation. One-month at-the-money implied volatility should move up to 13.50%.
EUR/USD
Chart Levels:
Support 1.4600..1.4570..1.4525..1.4440.
Resistance 1.4800..1.4909..1.5000..1.5100.
Hovering above the recent low at 1.4570 for a second week in a row and well within normal long term retracement parameters. Therefore we continue to wait and watch for reversal patterns here and in a series of other major currencies. Hopefully a thickening Ichimoku weekly ‘cloud’ coupled with the fact the Euro is still so very oversold should help. As and when we start inching higher one-month at-the-money implied volatility should move in tandem towards 12.00%. On the ECB’s effective exchange rate the Euro has actually strengthened since Wednesday as other currencies (mainly Sterling and the South Korean won) have weakened dramatically.
EUR/JPY
Chart Levels:
Support 157.62..157.00..156.00..154.00.
Resistance 159.62..161.00..163.11..164.00.
Our patience has paid off and Yen crosses are at last moving lower as expected. Those closest to March’s lows are GBP/JPY, KRW/JPY and NZD/JPY. This EUR/JPY has today broken below a thin Ichimoku ‘cloud’ which, coupled with the weekly close below 160.00, should send it hurtling a lot lower this month. There is a chance of a fall to 152.00 within the next two weeks, even though the Euro is already oversold. One-month at-the-money implied volatility exploded up to 12.00% and should continue up to 14.00% early this month. Only a weekly close below 152.00 completes a very major super-long term ‘rounded top’ that started early 2007 following a rally which started late in 2000.
GBP/JPY
Chart Levels:
Support 194.00..192.50..190.00..185.00.
Resistance 197.00..200.00..205.00..207.50.
Collapsing for a sixth week in a row, rapidly closing in on March’s low at 192.50. Long term bearish pressure should increase with the monthly close below 198.00, so we expect a drop to 190.00 imminently. At this point GBP/JPY may consolidate a little allowing other Yen crosses to catch up a bit. One-month at-the-money implied volatility rallied to 13.00% recently and should move a lot higher this next month, say to 15.00%. A sustained break below 190.00 confirms that the new ultra-long term trend is to a stronger Yen against the pound, and who cares whether this is because of unwinding of the carry trade or for any other of a myriad different reasons. Moves are likely to be fast and furious, taking no prisoners.
GBP/USD
Chart Levels:
Support 1.8000..1.7925..1.7800..1.7750.
Resistance 1.8300..1.8500..1.8800..1.9000.
The biggest monthly collapse since ejection from the ERM in 1992 (when Mr. Soros took on the Bank of England, and won). The move is much faster and bigger than that seen in 2005 (when Cable dropped from 1.9550 to 1.7000) and saying it is oversold must surely be the understatement of the year. No wonder one-month at-the-money implied volatility has picked up to 10.70% and should peak around here shortly. We, possibly alone among analysts and UK authorities, not only feel the move is overdone but that US dollar strength is not something which will carry on this year. Therefore we continue to wait until Cable bases before moving higher later this quarter.
EUR/GBP
Chart Levels:
Support 0.8000..0.7845..0.7800..0.7745.
Resistance 0.8139..0.8200..0.8255..0.8400.
A new all-time high for the Euro against the pound at £0.8139. This has forced us to change our medium and long term view, forcing us to move on to ‘Plan B’. We shall now have to allow for up to a year’s worth of sideways trading in a much broader band than that of Q2 2008. On the Bank of England’s Trade Weighted Index the pound is at its weakest since November 1996, when its weakest ever on this basis was February 1996. This week it should hold above 0.8000, nudging up very slowly to test 0.8200 and maybe 0.8255 later this month. Stabilising here before dropping towards 0.7800 next month. Then sideways in a very broad band of at least five pence, potentially with ‘spikes’ up to ten pence wide.
Published on Tue, Sep 2 2008, 08:22 GMT
0
0
Weekly Technical Commentary
Mon, Aug 18 2008, 11:06 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 109.00..108.35..108.00..107.00.
Resistance 110.50..110.67..111.00..111.80
A ‘hanging man’ on the weekly chart, half-way between last June’s high and the low of March this year, just under the weekly Ichimoku ‘cloud’. This is the first sign of stalling at this important long term pivotal area, and we shall be watching for more signs of topping until month-end. Here, and in a series of other major currencies against the USD, we shall be watching weekly and monthly candles for confirmation of an interim top/bottom/’spike high/low’. The USD is extremely overbought. Currencies that were sold the hardest are the ones likely to bounce back first and most strongly, making the clearest reversal patterns. Note that Kiwi already has a ‘hammer’ low point on its weekly chart.
EUR/USD
Chart Levels:
Support 1.4645..1.4600..1.4525..1.4440.
Resistance 1.4825..1.5000..1.5100..1.5200.
A massive clear-out with a low so far at 1.4645 as the world and his mother is now convinced that there is only one way for the USD to go and that is stronger. We disagree and remain possibly the one lone voice calling for further dollar weakness later this year and next. Therefore we are waiting and watching for reversal patterns on weekly and monthly charts, where so far we have little to cling to. This week expect the Euro to stage a messy attempt at putting in an interim low. Note it is at its most oversold ever, and that on the ECB’s Effective Exchange Rate it remains trapped in a tight range, higher than last year’s high, as other currencies are also a lot weaker.
EUR/JPY
Chart Levels:
Support 161.40..160.60..158.50..157.00.
Resistance 163.15..164.00..165.00..167.00.
A blessed relief that at least Yen crosses are going our way seeing as we have been pummelled by the US dollar’s sudden strength. This pair is now consolidating under the ‘broadening top’ and a large Ichimoku ‘cloud’. As expected on the break below 164.00 at-the-money implied volatility exploded up to 12.00% and should continue up to 14.00% later this month/early September. This suggests another big drop over the next two weeks, and our target is 158.50. There is a chance of a fall to 152.00 within the next three weeks. Only a weekly close below here completes a very major long term ‘rounded top’ that started early 2007 following a rally which started late in 2000.
GBP/JPY
Chart Levels:
Support 203.30..202.45..200.00..198.00.
Resistance 206.50..208.00..211.00..216.00.
Retreating from retracement resistance at 215.00, ahead of a very large Ichimoku ‘cloud’. The weekly close below 208.75 added to downside momentum as did the break below channel support. Long term bearish pressure should increase on a monthly close below 198.00, as it would do on a break below 190.00. The pound is oversold here, and against the US dollar more so than it has been since ejection from the ERM in1992. Three-month at-the-money implied volatility rallied from 11.00%, and one-month based 10.00%, as expected and these should move a lot higher over the next month, say to 14.00% or 15.00%. This week, and maybe next, allow for nervous consolidation between 202.00 and 209.00.
GBP/USD
Chart Levels:
Support 1.8600..1.8510..1.8385..1.8100.
Resistance 1.8800..1.9000..1.9400..1.9800.
Well at least we got one thing right: one-month at-the-money implied volatility has shot up towards 11.00%. As for Cable, its collapse has been greater than anything seen in a decade and it is more oversold since ejection from the ERM in 1992. Nevertheless, it remains well within long term retracement parameters and we shall continue to expect it to form an interim low point if not this week then by the end of this month. Note that other currencies must try and do something similar, the hardest hit recovering first and most dramatically. Therefore Cable, Aussie and Kiwi are the ones to watch. Then higher later this quarter as many are forced to review the US dollar, where consensus opinion is more one-sided than it has been in years.
EUR/GBP
Chart Levels:
Support 0.7845..0.7795..0.7745..0.7700.
Resistance 0.7945..0.7995..0.8025..0.8100.
Amazingly holding within the large ‘triangle’ despite the punishment Cable has received, and we are still watching for signs of topping. Last week’s fairly large ‘spike high’ is not really enough. Remember: this ‘triangle’ could easily turn into a ‘rectangle’ over the coming month. If we get no clearer picture by the end of the summer, we may also have to allow for up to a year’s worth of sideways trading in a much broader band than that of Q2 2008. All very frustrating and difficult yet we are reluctant to change our core view as price action does not really warrant it. On the Bank of England’s Trade Weighted Index the pound dipped to its weakest in a decade and is trying to recover its poise.
Published on Mon, Aug 18 2008, 11:06 GMT
0
0
Weekly Technical Commentary
Mon, Aug 11 2008, 10:37 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 109.00..108.60..107.90..107.00.
Resistance 110.00..110.50..111.00..111.80
The Japanese authorities must be looking on smugly as we trade ten Yen above the scary and psychological barrier at 100.00. It has now retraced half of the precipitous declines from June last year to March this year, and reached the weekly Ichimoku ‘cloud’. Once again we shall be watching for signs of stalling at this important long term pivotal area. The corrective rally since March’s low is mature, both in terms of distance travelled and time, and the US dollar is very overbought. Here, and in a series of other major currencies against the USD we shall be watching weekly candles for confirmation of an interim top/bottom/’spike high/low’. A ‘doji’ weekly candle is probably more likely here and clearer reversal ones in other majors.
EUR/USD
Chart Levels:
Support 1.5000..1.4900..1.4800..1.4775.
Resistance 1.5100..1.5200..1.5360..1.5500.
Clear-out time and a lesson to the complacent, including ourselves, and a warning of what is to come. Almost nine consecutive down days and four weeks lower in a row see the Euro at more oversold levels than anything since December 2005. This is obviously not sustainable and we are looking for a reversal pattern on this week’s chart. Price action so far this morning is a good start. Note also that at-the-money implied volatility has rocketed and could easily soar above the 11.00% barrier were we to reverse all of recent losses. Note that on the ECB’s Effective Exchange Rate it remains trapped in a tight range as other currencies are also weaker against the US dollar.
EUR/JPY
Chart Levels:
Support 165.30..164.00..163.65..161.50.
Resistance 165.60..166.00..167.00..169.00.
Slightly stronger support for our view that we are working within a potential ‘broadening top’. Today’s strong bounce from its lower edge, and the bottom of a large Ichimoku ‘cloud’, is understandable and hints that we will hold above here this week and maybe next. The combination of ‘dojis’, a ‘spike highs’ and a ‘spike lows’ on the daily and weekly charts underline this currency pair as one of many looking for direction. Rallies will hopefully be limited roughly to the middle of the formation (around 167.00) which should eventually turn momentum decidedly bearish. As and when we break decisively below 164.00 at-the-money implied volatility should rocket up to 14.00%. Be very careful here and in many Yen crosses.
GBP/JPY
Chart Levels:
Support 210.00..209.00..208.00..204.00.
Resistance 212.50..214.00..215.00..216.00.
Retreating from retracement resistance at 215.00, as expected, with much neater price action than many other Yen crosses. This currency pair continues to move in text book fashion and remains our barometer for future moves in a host of others. A weekly close below 208.75 is needed to add to downside momentum and other Yen crosses should also confirm and back up this idea. Over the coming month we would expect these to try and move in tandem. Three-month at-the-money implied volatility should hold around 11.00%, and one-month base at 10.00%, and if our view is correct move a lot higher late in August, say to 14.00% or 15.00%.
GBP/USD
Chart Levels:
Support 1.9100..1.9000..1.8830..1.8500.
Resistance 1.9400..1.9600..2.0080..2.0170.
Just when this Analyst was about to give up, look what happens! Cable drops to its lowest since November 2006 to cheers from the all too many in the anti-UK plc camp. Since last week one-month at-the-money implied volatility has reversed dramatically from 7.00% to 9.70% and could easily shoot up to 11.00% this quarter if our view is correct. Some may point to the monthly chart on the left saying there is a potential ‘head-and-shoulders’ top. We feel the formation is more likely to disappoint just as something similar did in 2006. Expect this pair to form an interim low point if not this week then by the end of this month. Then scampering higher later this quarter as many are forced to review yet again the outlook here.
EUR/GBP
Chart Levels:
Support 0.7800..0.7766..0.7745..0.7700.
Resistance 0.7850..0.7900..0.7945..0.8000.
Testing the lower edge of the ‘triangle’ and while still watching for signs of topping, this so far does not impress. This ‘triangle’ could easily turn into a ‘rectangle’ over the coming month. If we get no clearer picture by the end of the summer, we may also have to allow for up to a year’s worth of sideways trading in a much broader band than that of Q2 2008. All very frustrating and difficult yet we are reluctant to change our core view as price action does not really warrant it. At-the-money implied volatility has bounced from relatively depressed levels but nothing spectacular, underlining the need for caution and patience here. On the Bank of England’s Trade Weighted Index it has gone nowhere for the last eighteen weeks.
Published on Mon, Aug 11 2008, 10:37 GMT
0
0
Weekly Technical Commentary
Tue, Aug 5 2008, 07:13 GMT
by Nicole Elliott
USD/JPY
Chart Levels:
Support 107.00..106.00..105.00..104.40.
Resistance 108.39..108.62..109.00..110.15
Hard to believe we have spent the last eight weeks cautiously probing the 108.00/108.70 area. One really needs the patience of Job to survive in these conditions. Back inside the ‘channel’ after July’s ‘spike low’ keeps open the possibility of a ‘spike high’ this week or this month. The corrective rally since March’s low is mature, both in terms of distance travelled and time, and we continue to watch for signs of topping. The US dollar is not especially overbought (although it is against the New Zealand dollar) and momentum is steadily bullish. We favour generalised US dollar weakness in thin summer markets, with the Yen hopefully gaining more than other major currencies.
EUR/USD
Chart Levels:
Support 1.5500..1.5460..1.5345..1.5285.
Resistance 1.5700..1.5850..1.5900..1.6040.
Some whoops of delight as the US dollar gains against the Euro (yet falls precipitously against the South African rand). We remain singularly under whelmed and see it merely as yet another retreat from this year’s upper band to the centre of the range since March. One-month at-the-money implied volatility collapsed and should now try and base around 7.50%. We warn against complacency as thin summer markets may lead to some dramatic and unexpected moves, in complete contrast to what many have come to regard as ‘normal’ trading conditions this year (i.e. neat trading bands, first at 1.4400 to 1.4900, now between 1.5300 and 1.6000). Stock market conditions are likely to deteriorate too.
EUR/JPY
Chart Levels:
Support 167.00..166.70..166.00..165.00.
Resistance 168.60..169.20..169.70..170.00.
Still working within a potential ‘broadening top’ and may do so for another fortnight as the candles provide support for ‘Chikou Span’. The combination of ‘dojis’, a ‘spike highs’ and a ‘spike lows’ on the daily and weekly charts underline this currency pair as one of many looking for direction. The Euro is no longer overbought versus the Yen and bullish momentum continues to droop; a weekly close below 165.00 should tip the balance. Caution is warranted short and medium term and we continue to watch for topping activity in an area that has capped rallies on twelve different occasions. Note that other Yen crosses look very different and some (NZD/JPY) are testing pivotal support.
GBP/JPY
Chart Levels:
Support 211.50..209.00..208.00..204.00.
Resistance 214.00..216.00..219.00..221.00.
Looks just like dollar/yen (as Cable goes nowhere) underlining the fact that it is the Yen that has weakened. We are currently watching for signs of topping here and in a whole host of other Yen crosses. A weekly close below 208.75 is needed to add a little weight to this view. Other Yen crosses should also confirm and back up this idea. We notice that recently many Yen crosses look very different from each other both on the weekly and the long term charts. Over the coming month we would expect them to try and move in tandem. Three-month at-the-money implied volatility should hold around 11.00%, and one-month base at 10.00%, and if our view is correct move a lot higher late in August.
GBP/USD
Chart Levels:
Support 1.9650..1.9600..1.9500..1.9450.
Resistance 1.9850..1.9930..2.0080..2.0170.
Hard to believe we have been consolidating between 1.9400 and 2.0400 since December. Harder to believe that anyone can be expected to write interesting stuff about Cable day after day, week after week. This Analyst has pretty much given up the will to live with this one. One-month at-the-money implied volatility has collapsed to 7.00%, its lowest since November, and at this rate might drop again to 6.00% (where it is probably an excellent buy). While other financial instruments look set for big moves in thin August markets, Cable might go nowhere for another whole month, which is a very depressing thought. This is because ‘Chikou Span’ has to work its way through many candles.
EUR/GBP
Chart Levels:
Support 0.7890..0.7835..0.7766..0.7700.
Resistance 0.7940..0.7975..0.8025..0.8100.
Just as we thought, last week’s price action has done nothing to change the outlook in this nasty little chart pattern. While still watching for signs of topping, this one does not impress. If we get no clearer picture by the end of the summer, we may also have to allow for up to a year’s worth of sideways trading in a much broader band than that of Q2 2008. All very frustrating and difficult yet we are reluctant to change our core view as price action does not really warrant it. Interesting to note that the period of sideways work since late March coincides exactly with the time when the Euro traded between 1.5300 and 1.5900. As our view is that the Euro will eventually break higher, we have to allow for EUR/GBP to break higher with it too.