USD/JPY
Chart Levels:
Support 93.55..93.00..92.35..91.73.
Resistance 94.80..95.35..96.25..97.00
Prices are thrashing around the ‘neckline’ of a potential ‘head-and-shoulders’ interim top where the ‘head’ marks the upper edge of this year’s broad trading band. A good-sized flat-topped Ichimoku ‘cloud’ should grind prices lower again to manage a second weekly close below the pivotal 94.00 area (also Fibonacci retracement support). This is the rough mid-point of this year’s broad trading range where prices have held pretty much between 87.00 and 100.00. Downside pressure should increase for a rush towards critical support between 87.00 and 85.00. volatility has based and will rally strongly then. Open interest is roughly one quarter of 2007’s peak.
EUR/USD
Chart Levels:
Support 1.4100..1.4040..1.3900..1.3800.
Resistance 1.4235..1.4300..1.4339..1.4363.
Testing important resistance in the 1.4200 area, a 50% retracement of last year’s losses which coincides with a large, flat-topped Ichimoku ‘cloud’. Having consolidated in a small ‘triangle’ for the last two months, underlying just how little the Euro has given up, and with many other currencies doing something similar it is time for another bout of generalised US dollar weakness. Moving averages confirm this stance and momentum is bullish – and should increase significantly on a weekly close above 1.4200. One-month at-the-money implied volatility should base this week against the 11.75% level and pick up significantly, short-covering likely above 1.4200 and again above 1.4650.
EUR/JPY
Chart Levels:
Support 133.00..131.40..130.00..128.00.
Resistance 134.75..135.50..136.90..137.50
Bouncing strongly from trendline support despite a massive Ichimoku ‘cloud’, keeping prices within the 126.00 to 138.00 range that has held since late March. We expect the latest corrective rally to stall between the 61% Fibonacci retracement resistance at 134.50 and the 135.50 area. One-month at-the-money implied volatility has picked up from 14.00% and should eventually manage a sustained move through 18.00%. 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. Other Yen crosses look similar with the Yen looking a little ‘heavier’ against the Asian currencies than other majors.
GBP/JPY
Chart Levels:
Support 153.75..152.00..150.75..146.70.
Resistance 155.75..156.50..158.00..160.25.
Having easily met the measured target from the ‘head-and-shoulders’ pattern at 148.00 (sooner than we had hoped) the Ichimoku ‘cloud’ has forced a corrective bounce back up to the ‘neckline’. We expect it to stall slowly this week, so that the cross drops to the bottom edge of the cloud next week. Then we favour a slower leg down to 143.00 as many review the rationale behind market moves. One-month at-the-money implied volatility has bounced from 16.40%, one standard deviation from the mean at 11.50% since January 1995, and should increase towards 21.00%. Note that Yen crosses all look similar, dominated by USD/JPY moves rather than those of the other currencies.
GBP/USD
Chart Levels:
Support 1.6325..1.6200..1.6000..1.5980.
Resistance 1.6520..1.6600..1.6664..1.6750.
Like AUD and NZD, Cable is pushing into this year’s highest prices after ‘triangle’ consolidation. Moving averages are clearly pointing to a bullish trend, but note that there are a series of resistance levels up to 1.7000 that will need to be surpassed on the way up. Trendline support at the lower edge of the weekly Ichimoku ‘cloud’ held surprisingly well over the last three weeks and should now mark an interim low point. A weekly close above 1.6600 will probably kick-start the next round of short-covering. The Canadian and Singapore dollars are looking very similar, as is the Swiss franc, though these are lagging a little. Futures volume has been good, despite open interest running about half of the 2007/2008 peak.
EUR/GBP
Chart Levels:
Support 0.8600..0.8535..0.8400..0.8250.
Resistance 0.8700..0.8750..0.8800..0.8935.
Painfully slow steps in the corrective bounce from the 0.8400/0.8475 area, which is two standard deviations above the equivalent mean since 1986. The contrast in price action between the last five weeks compared to January and February is huge, underlining just how unusual it was in Q1 2009. The weekly Ichimoku ‘cloud’ has become 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.
