Forex

EUR

Comment: Despite all the noise and a strengthening US dollar which is the market consensus view, there has been minimal follow-through to the break below 1.5000. Yesterday’s small ‘hammer’ hints that we may have found an interim low. One-month at-the-money implied volatility could squeeze a lot higher than 10.50% if prices were to squeeze higher. Watch for a dramatic reversal this week.

Strategy: Buy at 1.4935; stop below 1.4800. Add to longs on a sustained break above 1.4950 for 1.5100 short term and then 1.5200.


EUR/JPY

Comment: A daily close below the bottom of a ‘Broadening Top’ and the Ichimoku ‘cloud’ completes an interim high and adds weight to our view that the all-time high at 169.97 will hold. Expect a drop to 158.00 within the fortnight is not unrealistic and further out a slide to 152.00. Below here and the long term picture gets seriously interesting.

Strategy: Sell at 162.50, adding to 164.00; stop well above 165.00. Short term target 161.60, then 160.60 and further out as above.


GBP

Comment: Eight consecutive down days, the fourth lower weekly candle, and more oversold against the dollar than it has been since 1992; this sort of thing is obviously not sustainable. Cable is making rather a hash of trying to stabilise against 1.9000 but the effort is worth it. A very cautious stance is warranted.

Strategy: Possibly attempt tiny longs at 1.8975; stop below 1.8900. Short term target 1.9100, then 1.9250.


JPY

Comment: Retreating slowly from the 110.00/110.50 area, as well as psychological and pivotal, it is a 50% retracement from last year’s high and coincides with the weekly Ichimoku ‘cloud’. The US dollar is no longer overbought and we continue to watch for a reversal pattern on the weekly chart.

Strategy: Attempt shorts at 108.80, adding to 109.50; stop above 110.55. Short term target 108.50 then 107.50