USD/JPY
Chart Levels:
Support 95.00..94.00..93.55..92.75.
Resistance 96.58..97.00..98.58..98.88
The very long term trend to lower prices is intact, the corrective bounce of Q1 2009 followed by a potential ‘head-and-shoulders’ interim top in Q2. The weekly Ichimoku ‘cloud’ has limited recent ranges on the upside and should now set up a test of the ‘neckline’ in the increasingly pivotal 94.00 area (also Fibonacci retracement support). This also represents the rough mid-point of trading this year where prices have held pretty much between 87.00 and 100.00. A weekly close below 94.70, in turn the lowest since March, should increase downside pressure for a rush towards critical support between 87.00 and 85.00. One-month at-the-money implied volatility should base and rally strongly then.
EUR/USD
Chart Levels:
Support 1.3870..1.3800..1.3750..1.3600.
Resistance 1.4200..1.4300..1.4339..1.4363.
Little to add as it is still struggling below the 1.4200 area, a 50% retracement of last year’s losses which coincides with a large, flat-topped Ichimoku ‘cloud’. Interestingly, it is also holding above the 38% retracement level and clearly above the 9-week average which has now inched up to 1.3879. This underlines just how little the Euro has given up despite testing such important resistance, keeping momentum bullish though less so than during the first week of June. Futures volume remains good hinting at a genuine worry as to the US dollar strength – where market consensus is that it should gain. We feel it is just a matter of time before more short-covering pushes the Euro higher.
EUR/JPY
Chart Levels:
Support 132.00..131.40..130.00..126.00.
Resistance 135.30..136.90..137.50..139.26
The tussle of the last six weeks or so in Yen crosses looks set to resolve itself to the downside. EUR/JPY prices are currently testing trendline support at the bottom of a massive Ichimoku ‘cloud’. We continue to favour a drop to 125.00/126.00 this month, a fairly pivotal support point as a break lower will probably trigger another collapse to 112.00. One-month at-the-money implied volatility should pick up as many repeat last year’s knee-jerk reactions (sell equities, buy Treasuries, Yen and US dollars) initially, before thinking more carefully. Note that longer term prices are expected to hold within this year’s ranges, trading in broad bands for another six months; picking interim highs and lows is unlikely to get any easier.
GBP/JPY
Chart Levels:
Support 152.80..150.80..148.00..146.00.
Resistance 156.60..159.00..160.50..162.60.
Breaking below the ‘neckline’ of a small ‘head-and-shoulders top’ today, adding weight to our view that all Yen crosses are in the process of topping prior to dropping over the summer. A small but perfectly formed formation which therefore has a better than even chance of ‘working’. Moving averages have crossed to bearish and the measured target for the pattern is 148.00 with some hesitation likely at the psychological 150.00 area - a level many feel is ‘fair’ for this cross. Later we shall allow for a slower leg down to 143.00 as many review the rationale behind stock market rallies in Q2 2009. Minor currencies are if anything slightly ahead in the topping process and therefore likely to lead majors lower.
GBP/USD
Chart Levels:
Support 1.6100..1.6000..1.5800..1.5750.
Resistance 1.6325..1.6600..1.6664..1.6750.
Having been capped between 1.6664 and 1.6750 for a whole month, below a 50% Fibonacci, the pound is looking a little ‘tired’. Other currencies have not supplied any ‘lift’ to Cable so allow for a tactical retreat this week and maybe next. Moving averages are clearly pointing to a bullish trend and the Lagging Span has little overhead resistance. The point now is where will we form an interim base. Trendline support at the lower edge of the Ichimoku ‘cloud’ is a perhaps too obvious starting point. Only a weekly close above 1.6600 might kick-start the next step higher, but because of the very large weekly Ichimoku ‘cloud’ perhaps only a decisive break above 1.7000 will really force many into hitting the panic button.
EUR/GBP
Chart Levels:
Support 0.8575..0.8475..0.8400..0.8250.
Resistance 0.8650..0.8750..0.8800..0.8935.
Holding above the 0.8400/0.8475 area which is two standard deviations above the equivalent mean since 1986. This is seen as necessary consolidation in the longer term trend to a lower Euro against the pound. The Euro is no longer oversold and downside momentum weak. The weekly Ichimoku ‘cloud’ is a lot wider than it was mid-June so perhaps sideways consolidation is in order this month. Rallies, which could easily touch 0.8800, are seen as selling opportunities for an eventual break below 0.8400. A monthly close below here completes a massive long term top, so that sterling would be unlikely to move above this area for many years to come. Long term investment decisions should take this into account.
