BoJ member Mizuno was expected to be more hawkish on the Japanese rate outlook sending JPY lower. In the US, the Democrats won the House of Rep. - the Senate is tied.
MAJOR HEADLINES – PREVIOUS SESSION
US
The key event in the US was off course the mid-term elections that resulted in a victory for the democrats as expected. They gained control of the House of Representatives but couldn’t gain majority in the Senate which now seats 49 from each party. Historically we’ve seen USD strength 18 of 19 times if one of the parties take both the house and senate, but today the EURUSD pair has moved in favor of the EUR as the democrats are likely to cut spending. Technically it is still a break of either 1.2835 or 1.2460 that should be a key indicator to where EURUSD is heading short to medium term.
JPY
Lately, the Japanese economy has shown several flaws that makes us believe a further weakening of the Yen. This was overnight confirmed in Mizuno's comments on the BoJ's semi-annual report. The possibility of a rate hike is more or less non-existent, mainly due to the soft figures in the CPI, but also the weakening on the consumer confidence and a disappointment in the retail figures has left the market believing that risk being short USDJPY/EURJPY is still low supported by USD-majors historical low vols. But we still believe to see a substantial upside move we need to see a break of 120.00 USDJPY and 150.75 EURJPY.
FX ORDERBOOK
Euro/US Dollar
EURUSD (1.2770 @ 14:05 GMT)
Support:
1. 1.2460 daily base which coincides with 1.2465 38% retracement
2. 1.2320 double top form march 2006
3. 1.2260 bull trend line from March 2006
4. 1.1635 38% retracement (0.8350-1.3667), also low from 2005.
Resistance:
1. 1.2825 top of the upper end of the bear channel from May 2006.
2. 1.2940 old top from August 2006.
3. 1.2980 long term inverse head-and-shoulder target.
4. 1.3175 upper bull trend channel from March 2006.
Resist.
1.2979
1.2874
1.2825
1.2770
1.2721
1.2666
1.2562
Support
British Pound/US Dollar
GBPUSD (1.9042 @ 14:05 GMT)
Support:
1. 1.8520 lower end of the bear channel from early August 2006.
2. 1.8500 daily base support.
3. 1.8325 wave high from March 2005.
4. 1.8090 wave support from July 2006.
5. 1.7330 long term bull trend support from 2001.
Resistance:
1. 1.9145 Old top from August.
2. 1.9215 old top from April 2005.
3. 1.9325 wave high from March 2005.
4. 1.9550 highs from december 2004.
Resist.
1.9358
1.9204
1.9132
1.9042
1.8978
1.8897
1.8743
Support
US Dollar/Japanese Yen
USDJPY (117.74 @ 14:04 GMT)
Support:
1. 116.50 wave low from late October.
2. 115.55 wave low from April (key level as it would take our weeky lower high/higher high, which would confirm accelerated downside)
3. 113.35 weekly base support.
4. 109.00 key support form confirmation of a monthly downward trend.
Resistance:
1. 119.20 choppy range base from early October.
2. 119.90 old top from mid-October.
3. 121.40 old top from December 2005.
4. 1250.00 50% retracement (form 147.63-101.67).
Resist.
119.90
118.83
118.26
117.74
117.18
116.68
115.61
Support
