USD/JPY
Chart Levels:
Support 94.00..93.00..92.35..91.73.
Resistance 95.35..96.25..97.00..99.00
Prices are still 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 weekly 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. One-month at-the-money implied 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 1.4292..1.4339..1.4363..1.4430.
The Euro managed a weekly close above important resistance in the 1.4200 area, a 50% retracement of last year’s losses which coincides with a large, flat-topped Ichimoku ‘cloud’; pity it did not manage a close above trendline resistance as well. Several other currencies are doing something similar so that the rally we expect for the Euro is caused by generalised US dollar weakness rather than anything Euro-specific. At the moment Pacific rim currencies are leading and Scandinavian ones are recouping much of last year’s extreme losses. One-month at-the-money implied volatility should base this week against the 11.00% level and pick up significantly in thin markets.
EUR/JPY
Chart Levels:
Support 132.00..131.40..130.00..128.00.
Resistance 136.90..137.50..138.35..139.26
Rallying by more than expected and many Yen crosses are now trading at the upper edge of this year’s very broad trading band. Hopefully the massive weekly Ichimoku ‘cloud’ will exert downward pressure, eventually, leading to a re-test of increasingly pivotal support around 128.00. 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 155.00..153.50..152.25..150.75.
Resistance 157.60..158.00..158.55..160.25.
Hovering at the upper edge of a rising Ichimoku ‘cloud’ and struggling with trendline resistance. Interestingly the pound is not overbought against the Yen and momentum is only slightly bullish. While we expect the latest rally to stall this might be a slow process that continues through until the end of August when the ‘cloud’ thins dramatically. We still feel an initial drop ought to be limited to the horizontal lower edge of the ‘cloud at 150.75, followed by a slower leg down to 143.00. 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%.
GBP/USD
Chart Levels:
Support 1.6300..1.6200..1.6000..1.5980.
Resistance 1.6600..1.6664..1.6745..1.6835.
Pity Cable didn’t manage a strong weekly close after nine weeks of ‘triangle’ consolidation. Maybe other currencies gaining against the US dollar will drag it up too. 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. A weekly close above 1.6600 will probably kick-start the next round of short-covering. Futures volume has been good and despite running about half of the 2007/2008 peak, open interest is picking up. Note that volume and open interest in Canadian dollar futures are running at records suggesting the US investor has grasped the threat of devaluation, at least against their northern neighbour.
EUR/GBP
Chart Levels:
Support 0.8600..0.8535..0.8400..0.8250.
Resistance 0.8700..0.8750..0.8800..0.8935.
Little to add as we continue to see tiny ranges at the same sort of levels that have held for the last six weeks. The contrast in price action between these compared to that of January and February is huge, underlining just how unusual Q1 2009 was. 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. Smaller trading bands should force one-month implied-volatility back down to 7.50%, the mean since 1999.
