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A bit of resistance at 90.50 in that pair

Per-Erik Karlsson from Avantage Financial GMBH at 10/13/09


Market comment

S&P 500 trading at a new yearly and above the 1075.75 previous high from 23th of September.
Would like to see a clean powerful break higher above this level to get excited about more upside. The weakness from 17th to 24th of September in the S&P 500 futures is still present and this is the area we need to blast through to get another rally higher. Since it has been able to make another yearly high this morning, we assume the previous weakness was temporarily, so looks bullish this morning, but that markets can turn quickly. Unless we see a strong up day closing clearly above the 1075.75 previous high, it could be a false break out. So we will watch the next few days’ price action for potential failed breakouts or a clean breakout. Gold had it first down day Friday after the breakout, the fact that it was able to rally substantially off the lows makes it look bullish in our opinion, but to confirm that outlook it must close up today and break the last week’s high during the next few sessions. Any hesitation to do so would bring in sellers. Also lots of talk about huge upside targets in Gold over the coming years (1500, 2000 etc.). When papers become flooded with that type of comments the best part of the moves are generally over, so it remains to be seen if this is true once again. JPY is weaker this morning and above 90 vs. USD, a bit of resistance at 90.50 in that pair.
We mentioned several times last week that USDJPY at the money calls looked attractive and we continue to favor a move towards 93 coming weeks. AUD and CAD outperforming and up materially vs. JPY in the last sessions, we expect more upside as we continue to like AUD, CAD and NOK. Same story with GBP as previous weeks, all weakness as it trades above 0.9350, next key resistance level is 0.9501, which now looks to be within reach over the next couple of weeks. We note that NZD is weaker over the last few sessions and we like to be short NZD vs. a basket of currencies as it looks very overpriced in our opinion as the recent strength in AUD has pulled NZD higher, but the economic outlook does not warrant this appreciation. Crude oil is above 73 USD per barrel this morning and technically Crude is still stuck in the 65 to 75 range we have seen since 1st of July and need to break out of this range to bring any more direction. Crude seems to fluctuate up and down this range based on different drivers like USD, Crude inventories (supply) and risk appetite. We have also noted that Crude has actually underperformed other risk trades by some margin last few weeks. Even the weaker USD has not be able to take Crude above the key 75 USD resistance level, should see a breakout soon in our opinion. Nat Gas futures remains bullish above 4.67 support and need to see a close above 5.05 to open for a run towards 5.20 (low Dec 08). We noted some supply in Nat Gas last week towards 5 level and we used this run up to get short just below 5 and took profit following Friday’s dip towards 4.80. We have been bullish on Soybeans since the false breakdown on Friday 2nd of October and soybeans have been going almost vertical over last 3 sessions, unfortunately the trade set up we were looking for never materialized. In fact most of the grains have been rallying on prospects for colder weather could damage the expected record crops.


Euro: Long term bullish trend intact above 1.4450 and 1.4840 is still the key resistance ahead of 1.50. A break of either 1.4450 or 1.4840 would open for the next directional move.

Cable: Weak below 1.6115 (former break down level), support down at 1.58

USDJPY: 88.00 is key support and while above this level we are looking for a move back toward the 93 level and as the repatriation flows back to Japan are done after the half year end closed yesterday, we expect JPY to struggle for the rest of the year.

Swissy: Basically 1.02 to 1.0453 range, needs to break either direction for a move directional move.

AUDUSD: Bullish momentum strong above 0.90 level, Next key resistance level is 0.93 now. According to Bloomberg AUDUSD has been 82.5% correlated to Gold, so probably smart to pay attention to Gold for clues on AUD going forward.

USDCAD: Breaking 1.05 on the stronger than expected Canadian unemployment Friday, next support is 1.03 followed by parity.

EURJPY: 129.80 remains key support for now and next resistance level is 132.70 followed by 135.48.

GBPJPY : Seems stuck in a 140 to 144.54 range over last week and these two levels are important support and resistance levels, so need to see a break above/below any of these levels to get a directional move.

AUDJPY: Break above 80.20 opens for 82.


Our outlook
PairOur strategy TodayOur medium term forecast
EUROWe remain bullish looking for another run to test 1.4850. A break would target 1.50Looking for 1.50 year end
CableWeak below 1.6115, some support at 1.58Negative on both GBP and USD
USDJPYBullish above 88 and looking for test of 92.50 resistance near termweaker JPY, 100 or higher year end
USDCADBearish and next target is 1.0300 followed by parityTest of 1.0350
EURJPYFavor longs above 129.80, should face selling towards 132.70, but a break above this level opens for 135.50140 level within 3 months
AUDJPYKey support at 76.50, bullish above and resistance at 80.20 todayLooking for a test of 82 within 2 months
GBPJPYWeak below 145 and support down at 140143 target hit, standing aside

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