EUR: Possibly attempt small longs at 1.4120

Nicole Elliott from Mizuho Corporate Bank at 01/22/10

Comment: Finding support at the 50% Fibonacci retracement from April 2009’s low (not October 2008’s low), ahead of the top of the weekly Ichimoku ‘cloud’. The Euro is very oversold but momentum is decidedly bearish for now. More good volume in the futures contract, and in the spot market, suggests many are being forced into positioning. Watch generally to see whether ‘risk avoidance’ now also includes avoiding the greenback.

Strategy: Possibly attempt small longs at 1.4120; stop below 1.4000. Add to longs on a sustained break above 1.4150 and again above 1.4225 for 1.4400.

Comment: Testing pivotal support at the key 127.00 area, a level that has limited downside tests for most of the last year. All aspects of this weekly chart are currently suggesting a short position. The Euro is more oversold than it has been in twelve months but bearish momentum is also at its strongest since May 2009. Expect a little more hesitation here today as investors fret as to what the Japanese authorities might or might not do.

Strategy: Attempt small shorts at 127.55; stop above 129.55. Short term target 127.00, then more.

Comment: Stuck between the Ichimoku ‘cloud’ and 50% Fibonacci support. Daily and weekly ‘clouds’ become very thin Tuesday and mid-February so watch for upside breaks then.

Strategy: Attempt small longs at 1.6240; stop below 1.6100. Short term target 1.6380, then 1.6450.

Comment: Still hovering at 38% retracement support, moves increasingly erratic, so that we formed a very strange candle yesterday (a mix of a ‘spike high’ with ‘bearish engulfing’ candle). The 9-day moving average has dropped below the 26-day one now suggesting a bearish position (though we have yet to drop below the ‘cloud’). Expect yet more messy work at current levels today, keeping in mind that later this month we expect another drop towards 88.50.

Strategy: Sell at 90.15, adding to 91.00; stop above 92.05. Short term target 89.80/89.50, then 88.50.