USD/JPY
Chart Levels:
Support 89.65..89.30..89.00..88.00.
Resistance 91.15..92.25..92.55..93.25.
Conflicting signals as we remain trapped below ‘channel’ resistance with two consecutive small ‘spike lows’ ahead of the 26-wek moving average at 89.30. The Ichimoku ‘cloud’, which thickens and drops mid-May, suggests one should continue to hold a short position while the moving averages turned to a long one mid-February. The yen is looking 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. We still favour a small short.
EUR/USD
Chart Levels:
Support 1.3498..1.3443..1.3433..1.3400.
Resistance 1.3600..1.3840..1.3900..1.3965.
The break above ‘channel’ resistance proved ‘false’, the 9-week moving average pushed it back down again and the Euro formed a ‘bearish engulfing’ candle last week closing below the Ichimoku ‘cloud’ for the first time since May last year. It is still very oversold and momentum is zero. We warn that investors should continue with a flexible outlook for this year’s big laggards, the Euro and sterling. Allow for some sort of (probably large) spike low this week and out until mid-April in both of these against a series of other currencies, prior to finding an important lasting interim base. One-month at-the-money implied volatility picked up from recent lows and should nudge back up to 10.75%.
EUR/JPY
Chart Levels:
Support 122.00..121.40..120.70..119.66.
Resistance 123.35..124.25..125.00..125.36
While the yen has strengthened against most currencies so far this year, progress has been slow and halting and rather than trending it is holding broad ranges. This is typical of the yen where after furious moves it can consolidate sideways for many months. Therefore we shall continue to allow for a series of relatively small random moves for another month or so, between 120.00 and 125.00 in this pair. 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. However, by late April dollar/yen should start to move lower giving this cross a nudge even lower than February’s 119.66.
GBP/JPY
Chart Levels:
Support 135.00..134.85..133.85..132.00.
Resistance 137.35..138.00..139.35..140.00.
Working in an inverted ‘flag’ formation around 61% Fibonacci retracement support as Cable does something similar. Last week’s bounce failed ahead of 140.00, pushed down again by the 9-week moving average which now lies at 139.63. Expect some roughly sideways work between 135.00 and 140.00 for another week or two but note that 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 1.4929..1.4873..1.4781..1.4700.
Resistance 1.5200..1.5329..1.5385..1.5575.
Cable was slapped down from the top of the potential ‘flag’ formation at the bottom of an A, B, C-type formation where C equals 1.6 times A. Between now and mid-April Sterling remains vulnerable to a speculative attack which might take prices a lot lower, albeit briefly. Record volume the week before last, and record open interest suggest too many are already keen to sell Cable. It is still terribly oversold, and bearish momentum has eased, so caution is warranted as we watch for an important interim low to build. Note that most other currencies do not have similar patterns as only the pound and the Euro have seen serious retracements this year. Other currencies have either held within bands or are getting stronger, CAD leading.
EUR/GBP
Chart Levels:
Support 0.8995..0.8915..0.8875..0.8750.
Resistance 0.9135..0.9155..0.9240..0.9300.
So very precarious as we hover against ‘channel’ resistance for a third consecutive week. We remind that the possibility of a new bigger ‘spike high’ above the top of the downward-sloping ‘channel’ as we saw in January and October 2009 is a possibility, probably some time between now at mid-April. Because momentum is fairly neutral and the Euro a tad overbought allow for a struggle above the top of the weekly Ichimoku ‘cloud’ until month-end. Then we favour 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.
