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JPY weak again this morning as the equities rally

Per-Erik Karlsson from Avantage Financial GMBH at 10/15/09


Market comment

S&P 500 trading at a new yearly high and above the 1075.75 previous high from 23th of September on the back of stronger than expected earnings out from Intel last night. The weakness from 17th to 24th of September in the S&P 500 futures has now been cancelled out and we are not looking for shorts anymore since the 1075.75 has been taken out. Gold had a successful test Monday followed by a up day yesterday, which opens for higher prices. Looking at the Gold chart there is plenty of room in the current trend channel to rally before we would hit the overhead resistance and 1100 could be reached very soon. However we do pay attention to potential weakness signals in case it would reverse current momentum, but so far we cannot see any weakness. JPY weak again this morning as the equities rally. USD is even weaker as it the USD selling seems to be endless for the moment. We have long talked about that we favor USD and GBP weakness for the rest of the year and our yearend target have long been 1.50 vs. Euro, which now looks like it could be hit anytime. On note of caution on EURUSD though, the trade starts to look very crowded and we would not be surprised to see a correction at some stage over the next week to shake out weak longs. 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. Crude oil is above 75 USD per barrel this morning and technically Crude breaking out of the 65 to 75 range we have seen since 1st of July. Nat Gas did top out just above 5.10 and the supply we outlined over the last few days was indeed true. Nat Gas trading down through 4.67 support this morning opening up for a move towards 4.33 support. 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. However the rally looks a bit overdone and we are watching for any sign of weakness going forward to enter a potential short.

Some interesting news stories:


Euro: Took out 1.4850 key resistance yesterday and 1.50 is next up as long as 1.4650 holds.

Cable: Bullish reversal after hitting 1.5720 (Dec 08 high) support yesterday, key resistance is prior break down level of 1.6115.

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: Broke below 1.02, looking for parity next.

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: Break below 1.03 has opened for an extension to parity.

EURJPY: Trading up above 132.70 has opened for a test of 135.48 resistance near term.

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: 82 is now key resistance (yearly high), a break of 82 opens for 85.


Our outlook
PairOur strategy TodayOur medium term forecast
EUROLooking for a test of 1.50Looking for 1.50 year end
CableBullish above 1.58 and looking for a test of 1.6115 (break out level)Negative 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 targeting parityTest of 1.0350
EURJPYFavor longs above 129.80 and looking for test of 135.50 near term140 level within 3 months
AUDJPYLooking for a break of 82 (yearly high) for a run towards 85Looking for a test of 82 within 2 months
GBPJPYWeak below 145 and support down at 140146.70 within 1 month

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