GBP: Possibly attempt very small longs at 1.5975

Nicole Elliott from Mizuho Corporate Bank at 02/01/10

Comment: Dropping as feared into the dip created by the weekly ‘cloud’, closing in on Fibonacci 50% support. We expect to see signs of forming an interim low this month. Slightly worryingly the moving averages have just crossed to bearish. The Euro is terribly oversold so be careful not to get too wrapped up with Greece’s problems. Bearish momentum is as strong as it was in September 2008.

Strategy: Do nothing but if you have to possibly attempt small longs at 1.3885; stop below 1.3800. Short term target 1.4000, then 1.4180.

Comment: The lowest weekly close since March, below the 50% Fibonacci support and the second consecutive one below the weekly ‘cloud’. The Euro is terribly oversold and bearish momentum has eased fractionally. All yen crosses are expected to trade down this month.

Strategy: Attempt small shorts at 125.25; stop above 127.15. Add to shorts on a sustained break below 124.30 and again below 124.00 for 122.00.

Comment: Hovering at the bottom edge of an extremely thin weekly Ichimoku ‘cloud’, towards the lower end of the broad sideways band that has held since June. Watch for signs of forming an interim low this month, but be aware this might be a very slow process.

Strategy: Possibly attempt very small longs at 1.5975; stop below 1.5895. Short term target 1.6265/1.6300.

Comment: Nothing to add as we continue to hover above the 50% Fibonacci retracement support and the top of a relatively thin Ichimoku ‘cloud’. Let’s see if the 9-day moving average caps again. This month we still expect a drop to 61% retracement (88.25) – and note that the bottom of the ‘cloud’ lies at this point until mid-March at least.

Strategy: Sell at 90.25/90.55; stop above 91.00. Short term target 89.65, eventually 88.50/88.25.