USD/JPY
Chart Levels:
Support 98.00..97.00..96.55..95.65.
Resistance 99.77..100.75..100.55..101.45
Because we predict a series of broadly sideways moves for the bulk of this year, with many interim highs and lows along the way, predicting where these lie will be a difficult problem which we will have to face again and again. This is the case with April’s high at 101.45, just as it was with March’s one at 99.69. At the moment we see the pull-back from the recent high as corrective, retracing just 38% of the previous rally, and an A, B, C-type move which should base imminently. This should then set up for another cautious upside probe next month. However, if the market was to break and then trade consistently below the 97.00 area we will probably be tempted to say an interim high is already in place.
EUR/USD
Chart Levels:
Support 1.2945..1.2835..1.2775..1.2600.
Resistance 1.3300..1.3400..1.3585..1.3739
Unfortunately, given our negative view on the US dollar, the thick Ichimoku ‘cloud’ has done a splendid job capping the Euro, forcing it to give up 61.8% of the previous rally. Because the ‘cloud’ thins dramatically this week we feel there is a chance of basing and then rallying sharply until month-end. The Euro is oversold so watch for a strong reversal candle to form on the daily and weekly charts. Further out only when the Euro starts holding consistently above the 1.3500 area will something more like a proper rally emerge. Until then prepare to remain flexible with relatively small positions. Note also that one-month at-the-money implied volatility is expected to base and rally from 14.00%.
EUR/JPY
Chart Levels:
Support 127.40..126.40..125.00..121.75.
Resistance 130.00..131.00..134.50..137.40
Consolidating rather unsteadily close to the upper edge of the broad trading band that held from October until March, roughly between 115.00 and 130.00. Last week’s close below 130.00 is worrying and hints that perhaps an interim high is already in place. Note that over the next nine months or more we favour this, and other Yen crosses, to move broadly sideways in very wide ranges. At the moment we see the pullback of the last two weeks as corrective, and therefore it should base imminently around the 128.00 area. This would then set up for another cautious upside probe next month, where rallies will probably be capped by resistance around 142.00. Implied volatility should pick up too.
GBP/JPY
Chart Levels:
Support 141.50..139.00..137.65..135.00.
Resistance 147.00..148.50..150.00..151.50.
Retreating from the psychological level at 150.00, and because this year’s rally was stronger than that in some other Yen crosses it has not pulled back into the previous range. Therefore it is clearly corrective and we continue to favour another rally to the measured target which remains at 165.00. Momentum is still bullish and the pound is almost oversold against the Yen. One-month implied volatility is expected to base from the 22.00% area and eventually rally sharply. If this cross was to start holding consistently below 140.00 we would have to review as it hints that an interim high is already in place and the next step ought to be downside probing before a new interim low is established.
GBP/USD
Chart Levels:
Support 1.4530..1.4435..1.4365..1.4200.
Resistance 1.4665..1.4780..1.4960..1.5070.
Having broken above the downward-sloping ‘wedge’ formation Cable is now struggling under the psychological and Technical level at 1.5000. The drop of the last three days has seen it give up 38% of March’s rally and the move ought to find support and base between here and the Ichimoku ‘cloud’. Sterling is no longer overbought and momentum remains bullish, open interest in the futures contracts down 50% from the peak, suggesting a lot less speculation. What it now needs is a little help from rallies in other major currencies and a weekly close above 1.5000. This should send many off to re-think this currency pair in particular (and the value of the US dollar) and UK plc generally. Volatility should also start picking up again.
EUR/GBP
Chart Levels:
Support 0.8785..0.8725..0.8635..0.8500.
Resistance 0.8920..0.9000..0.9075..0.9200.
Difficult as we approach the lower edge of the broad trading band that has dominated since December. For this week, and maybe the next three, we shall allow for a series of random messy moves roughly between 0.8750 and 0.9050. Over the next six weeks expect a re-test of February’s low at 0.8635. A sustained break below 0.8600 very late in Q2 2009 should see the pair move slowly lower towards 0.8250. 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. One-month at-the-money implied volatility, which collapsed from 21.00% to 12.00% over the last two months, should form an interim base.
