EUR: Attempt small longs at 1.4740/1.4700

by Nicole Elliott
Mizuho Corporate Bank

EUR
Comment: After five consecutive weekly falls, and about nine daily ones, the Euro is trying to stabilise against retracement support and the Ichimoku ‘cloud’. Note how quickly this thickens until the end of the year. The Euro is still terribly oversold. Expect a very messy and unstable attempt at basing this week, surprising many as all and sundry are convinced we have already seen the Euro’s peak and that there is only one way for the US dollar to go (stronger).

Strategy: Attempt small longs at 1.4740/1.4700; stop below 1.4600. Short term target 1.4800 and then 1.5000.

EUR/JPY
Comment: Consolidating neatly under the bottom of the ‘broadening top’ formation and below the bottom of the Ichimoku ‘cloud’. The longer we do this the more bearish momentum and the more investors will look into the abyss. The weekly close below 163.00 has turned momentum bearish. We now expect a drop to 158.00 within the fortnight and further out a slide to 152.00. Below here and the long term picture gets seriously interesting.

Strategy: Sell at 162.35, adding to 163.00; stop well above 164.25. Short term target 162.00/161.60, then 160.60.

GBP
Comment: A small bounce from a low at 1.8510 and retracement support. Few and small signs of basing and well overdue after four consecutive weekly declines and eleven daily ones culminating in a ‘hammer’ Friday. Over the next week or two we expect a bounce to 1.9000.

Strategy: Attempt longs at 1.8700, adding to 1.8630; stop below 1.8500. Short term target 1.8800, then 1.9000.

JPY
Comment: A ‘hanging man’ on the weekly chart against retracement resistance and the Ichimoku ‘cloud’. This hints that the rally will stall here again this week, eventually tipping the balance for a drop back down to the 105.00 area. The US dollar is still very overbought as futures positions are being re-built. We expect at-the-money implied volatility to increase significantly over the coming month.

Strategy: Attempt small shorts at 110.15/110.40; stop above 110.75. Short term target 109.35 then 108.55.