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Weekly Technical Commentary

Mon, Jun 15 2009, 10:24 GMT
by Nicole Elliott

Mizuho Corporate Bank

USD/JPY

Chart Levels:

Support 97.00..95.50..94.30..93.55.

Resistance 99.00..99.80..100.75..101.45

Despite trading both up and down, admittedly in a very narrow trading range, implied volatility hasnot picked up as much as we had hoped. Prices have held roughly between 94.00 and 100.00 for the last three months and we can probably ‘look forward’ to more of the same at least until month-end. Picking intermediate tops and bottoms will not get any easier as the risk of ‘extensions’ increases the longer we hold in the broad band established in March. Early this week we favour a cautious initial upside test, followed by a slow drift back down again. Then down first, up later, next week. Futures volume and open interest remain very subdued indeed, the latter less than half 2007’s peak, a sign the ‘carry trade’ is dead.

EUR/USD

Chart Levels:

Support 1.3800..1.3750..1.3600..1.3425.

Resistance 1.4000..1.4200..1.4339..1.4363.

The Euro is consolidating under this month’s high at 1.4339, in turn its best level since January’s high. We see this as an A, B, C-type correction but bears will be pointing to a potential ‘head-and-shoulders’ on the daily chart. The 1.4200 area is a 50% retracement of last year’s losses and coincides with a large, flat-topped Ichimoku ‘cloud’ so we feel prices will thrash excitedly either side of here for another week, maybe until month-end. We feel the Euro should form another new interim base between 1.3800 and 1.3600, setting up for another strong rally in thin summer conditions. Note that futures volume has been very good, hinting that there is a genuine worry as to the staying power of the US dollar – and the Euro!

EUR/JPY

Chart Levels:

Support 135.30..134.25..133.85..133.00.

Resistance 137.50..138.33..139.26..140.00

Not charting neatly but still mapping out this year as expected – broadly sideways! We feel Yen crosses will continue to trade across the page at the higher half of the ranges so far this year. Picking interim tops and bottoms will not get any easier and the worry of ‘missing out’ on the big move will persist. In fact many have still not got their heads around the idea that the Yen is not necessarily a one way street. For this pair prices should hold below 138.00 for much of the coming week, maybe dropping as low as the 26-day moving average at 133.00. If the range since March has been roughly 126.00 to 138.00, then its mid-point is 132.00 and prices should hold above here, probably until the end of the month.

GBP/JPY

Chart Levels:

Support 160.000..155.50..153.45..150.75.

Resistance 161.75..162.55..163.35..165.00.

As the pound is the best performing major currency over the last one, three and six months, this cross has traded a little higher again to 162.55. This is more than a 38% retracement of last year’s declines and it has met the weekly Ichimoku ‘cloud’. This hints that further gains this month might be difficult and that we should allow for a period of sideways moves. The difficulty will be in establishing where these interim highs and lows might lie. We feel the 9-week moving average at 150.75 has a good chance of limiting drops, at least on a first attempt. As for the upside, a sustained break above the psychological 165.00 (and November’s high) is unlikely. Note the increasingly deep ‘cloud’ though.

GBP/USD

Chart Levels:

Support 1.6300..1.6125..1.6000..1.5800.

Resistance 1.6475..1.6622..1.6664..1.6800.

Retreating from this month’s high at 1.6664 in what those who have missed Cable’s rally (and there are an awful lot of them) are hoping is a ‘double top’. A good rule of thumb when one has missed a big move is to buy a portion now, at any price, and hope for an improvement on the second instalment, not to hold out and hope – and maybe miss the boat again. Almost record volume in the futures contracts suggest this might already be the case (or maybe just roll overs). Bullish momentum is stronger than it has been since 1993 as foreigners look on incredulously at the political mess our MP’s and their expenses have caused. Here is one group that missed out, though maybe not on the way down.

EUR/GBP

Chart Levels:

Support 0.8475..0.8400..0.8250..0.8200.

Resistance 0.8650..0.8800..0.8870..0.9035.

A weekly close at a new low for this year (0.8520) is impressive. Pity it didn’t also manage a close below retracement support and the thin Ichimoku ‘cloud’ while it as at it, making our life easier. Downside pressure is stronger than anything seen in the last twenty years, so maybe we should not complain. The 0.8475 level is two standard deviations above the equivalent mean since 1986 so allow for a little hesitation here for a week or two. We continue to target a drop towards 0.8250, a move currently suggested by moving averages. This would only take it back to levels last seen in Q4 2008, in turn the weakest that sterling had ever been against the Euro up until that time. Especially impressive considering the politics.

• Download Full Weekly USD/ JPY and EUR/USD Technical Commentary
• Download Full Weekly EUR/JPY and GBP/JPY Technical Commentary
• Download Full Weekly GBP/USD and EUR/GBP Technical Commentary

Published on  Mon, Jun 15 2009, 10:34 GMT