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EUR: Attempt tiny longs at 1.3700

Nicole Elliott from Mizuho Corporate Bank at 02/05/10



Comment: Suddenly everybody’s new pet hate as we retrace half of the rally from March to December 2009. Knee-jerk reactions to falling stock indices repeat what they ‘learnt’ in 2008. Be careful as repatriation is much less likely this time around. The Euro is terribly oversold and one-month at-the-money implied volatility has only just inched up from a potential new interim base just under 10.00%. Watch for signs of a dramatic reversal, so that we form a big ‘spike low’ either today or next week.

Strategy: Attempt tiny longs at 1.3700; stop well below 1.3650. Short term target 1.3850, then 1.4000.


Comment: This yen cross is leading on the way down, trading at the lowest level since March 2009 as everyone suddenly fret about the Eurozone’s chances of imploding. Other yen crosses have some catching up to do. We are oversold but bearish momentum is very strong. ‘Channel’ support has limited the downside today we might continue to do so all day. Implied volatility should tick up some more.

Strategy: Possibly attempt the tiniest of shorts at 123.00, but only if prepared to add to 124.50; stop well above 125.00. First target 122.00/121.60, eventually the 118.00 area.


Comment: Mercifully not at the eye of the storm though testing 38% Fibonacci retracement from last year’s low and the bottom end of the broad sideways range of the last eight months. There is a very high chance that we will dip below here today and next week but there is also a strong chance that this will be a ‘false break’ and ‘extension’. Wait and watch for signs of forming yet another interim low in this area, a sort of ‘spike low’. No need to rush really as Cable has been going broadly nowhere for too long.

Strategy: Possibly attempt tiny longs at 1.5735; stop well below 1.5700. Short term target 1.5900/1.6000.


Comment: Dropping below 50% Fibonacci support, testing the flat bottom edge of a large Ichimoku ‘cloud’, with moving averages suggesting a short position. Expect hesitation at this point this morning, maybe all day, watching for a weekly close below 88.25 which is needed to set off another downside test of key support between 87.00 and 85.00. Note that currently the USD is not oversold and momentum is only just bearish.

Strategy: Attempt small shorts at 89.65 but be prepared to add to 90.25; stop above 91.00. Short term target 89.00, then 88.50/88.25.

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