EUR: Attempt small longs at 1.3775

Nicole Elliott from Mizuho Corporate Bank at 02/10/10

Comment: A good-sized ‘bullish engulfing’ candle yesterday has sent the Euro up to test the collapsing 9-day moving average. Sentiment is so anti and it was so oversold that yesterday’s rally has seen bearish momentum halve. We continue to urge extreme caution and watch for signs of a dramatic reversal, so that we form a big ‘spike low’ probably this week.

Strategy: Attempt small longs at 1.3775; stop below 1.3640. Short term target 1.3850/1.3900.

Comment: Tricky and inconclusive as we bounce from the bottom of ‘channel’ support but get stuck at the 9-day moving average at 123.84. While the Euro is still somewhat oversold, bearish momentum has eased very considerably yesterday. Expect more hesitation in a small range around here this morning while allowing for a short squeeze towards 125.00.

Strategy: Possibly attempt the tiniest of longs at 123.50/123.00; stop below 122.00. First target 124.20, maybe 125.00.

Comment: Trading back at 1.5700, what had been the lower edge of the band that had held since July 2009. Yesterday’s good-sized ‘bullish engulfing’ candle adds weight to our view that we might be forming some sort of ‘spike low’. Nerves of steel and patience are the order of the day.

Strategy: Attempt small longs at 1.5680; stop well below 1.5600. Short term target 1.5750/1.5800, then 1.6000.

Comment: Holding just above 50% Fibonacci support and above the bottom edge of a good-sized Ichimoku ‘cloud’. Expect more of the same this morning, probably with another cautious upside test of the 9-day moving average at 89.92 (and a little bit more). Then a test of the flat-bottomed ‘cloud’ either very late today or early tomorrow. We continue to favour an eventual break lower some time this month.

Strategy: Attempt shorts at 89.75; stop well above 90.00. Short term target 89.30, then 88.80/88.55.