Currency Rallies Classed as Corrective; More USD Gains Ahead (Daily Classical)

• Euro rallies seen limited; look to sell

• Dollar/Yen setbacks to be well supported ahead of 97.00

• Cable seeking out fresh lower top ahead of next drop

• Dollar/Swiss to be very well supported on dips; look to buy

EUR/USD

EUR/USD – The market is in the process of correcting following the latest drop off from the 2009 highs set in the previous week by 1.4340. Any additional rallies are now seen well capped by previous support now turned resistance by 1.4070-1.4100 and rallies towards this area should be used as opportunities to initiate fresh short trades in anticipation of a break back below 1.3805 towards the 1.3500-1.3700 area. Strategy: SIDELINED FOR NOW; LOOK TO SELL.

USD/JPY

USD/JPY – The break of shorter-term trend-line resistance off of the 2009 highs on Friday likely opens the door to additional upside over the medium-term, with any setbacks now seen well supported on dips to 97.25, which acts as previous resistance now turned support. Look for a higher low to carve out in the lower 97.00’s ahead of fresh upside over the coming days back above 98.90 and towards the more critical falling trend-line resistance just over 100.00. Strategy: SIDELINED FOR NOW; LOOK TO BUY. We had issued a buy recommendation at 97.25 but do not expect the trade to trigger by 5pm ET.

GBP/USD

GBP/USD – The market is currently in the process of bouncing following the latest sharp sell-off from the previous week’s 2009 highs set by 1.6665. However, any additional rallies are seen limited to 1.6340-1.6485, the 61.8% and 78.6% fib retracements off of the latest move, in favor of a resumption of the current round of setbacks. A lower top is now sought out below 1.6665 to be confirmed on a break back below 1.5800, which we believe will transpire over the coming days. Strategy: SIDELINED FOR NOW; LOOK TO SELL.

USD/CHF

USD/CHF – Inversely correlated to price action in the Euro and as such our analysis should be mirrored here with any setbacks in the pair seen limited to the previous resistance now turned support area by 1.0745-65. The market is in the process of attempting to carve out a higher low above 1.0590 to be confirmed on a break back above 1.0990 over the coming sessions. A break above 1.0990 will open the next upside extension towards 1.1270 further up. Strategy: SIDELINED FOR NOW; LOOK TO BUY.