USD/JPY
Chart Levels:
Support 90.00..89.65..89.00..88.00.
Resistance 91.09..92.25..92.55..93.25.
Not easy and not obvious as we remain trapped between ‘channel’ resistance and pivotal support at 88.00. Elements of the Ichimoku ‘cloud’ chart are mixed with moving averages hinting at a long position and the ‘cloud’ dropping and thickening to a very good size late May. Random moves will probably become ever smaller, fading ahead of targets, as the yen looks for intermediate and long term direction. Note that the Lagging Span has hit resistance from the candles and would have to worm its way through a thicket of closely packed candles for another five months. Therefore there is a good chance that were we to trade sideways across the page the yen would break ‘channel’ resistance, but not in a meaningful way.
EUR/USD
Chart Levels:
Support 1.3650..1.3585..1.3535..1.3433.
Resistance 1.3800..1.3840..1.3900..1.3965.
A fourth consecutive week with ‘spike low’ type reversal weekly candles above 61% Fibonacci retracement support, all the weekly closes inside the growing Ichimoku ‘cloud’. Last week’s might be seen as a ‘bullish engulfing’ candle and such a pity it didn’t manage to close above ‘channel’ resistance too. All this adds weight to our view that the Euro is trying to find a base for the corrective move of the last three months. Note that it is still somewhat oversold, that bearish momentum has eased a bit, and that consensus opinion is very much against the single currency. One-month at-the-money implied volatility at 9.35% is lower than it has been since August 2008, which may hint at complacency and/or an overcrowded trade.
EUR/JPY
Chart Levels:
Support 123.65..123.00..122.00..121.45.
Resistance 125.36..127.00..128.40..129.00
Having rallied to 125.00 as expected, we shall now be looking for signs of stalling here, thereby keeping this pair in the narrow range above the psychological 120.00 for another few days and maybe weeks. However, note that all elements of this chart point to holding a medium term bearish position, and that the 9-week average has dropped sharply and might push prices a lot lower imminently. Therefore we shall continue to allow for a series of relatively small random moves for another month or so. Expect variations on this theme for other yen crosses. Moves in yen crosses will probably be caused by the currencies as the USD/JPY is also expected to move broadly sideways for the rest of this month.
GBP/JPY
Chart Levels:
Support 136.00..134.85..133.85..132.00.
Resistance 138.00..139.30..140.00..141.00.
Last week’s small ‘hammer’ after the previous large ‘spike low’ ahead of 75% Fibonacci retracement as Cable does something similar. We continue to favour a strong bounce this week and maybe until month-end, back up to 50% Fibonacci retracement and the 9-week moving average at 140.70. Then watch for signs of topping as all aspects of this chart suggest a medium term short position. Later this year we still favour another move lower, most likely when the lower edge of the weekly Ichimoku ‘cloud’ drops sharply in early April. This should take the cross down to the 130.00 area. Note that one-month at-the-money implied volatility is about the lowest it has been since September 2008.
GBP/USD
Chart Levels:
Support 1.5000..1.4873..1.4781..1.4700.
Resistance 1.5235..1.5375..1.5575..1.5620.
Another slide below 61% Fibonacci retracement support which ends up as a strong ‘hammer’ on the weekly candle – for a second consecutive week. This combination suggests that at last Cable is trying to form an interim low to the correction that started in August last year. This takes an A, B, C-type form where C equals 1.6 times A. Note also the very thin weekly Ichimoku ‘cloud’ above us, which gets very big again late April, hinting at a window of opportunity over the coming month. Almost record volume last week as contracts months roll over suggest many are perhaps complacent with current positioning. Still terribly oversold, and bearish momentum stalling, are other factors that back up our view.
EUR/GBP
Chart Levels:
Support 0.9000..0.8955..0.8875..0.8750.
Resistance 0.9135..0.9155..0.9240..0.9300.
We are surprised to see the Euro back up at ‘channel’ resistance after the previous week’s ‘shooting star’ candle. This means we may have to prepare for the possibility of a new ‘spike high’ above the top of the downward-sloping ‘channel’ as we saw in January and October 2009. Because momentum is fairly neutral and the Euro somewhat overbought allow for a struggle above the top of the weekly Ichimoku ‘cloud’ until month-end. Then allow for another test of the flat-bottomed ‘cloud’ at 0.8750 and later on increasingly important support at 0.8635. On the Bank of England’s basis sterling should strengthen to 83.00; a sustained break of 75.00 on this measure would be very worrying indeed.
