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Monthly Technical Outlook

Nicole Elliott from Mizuho Corporate Bank at 01/05/10


Monthly Outlook for EUR

Comment: The Euro was last month’s worst performing major currency, dropping back down to where it was early September. This has forced us to adjust our medium term view and we do not expect a break above the psychological 1.5000 area this quarter. Instead we expect it to try and stabilise against Fibonacci support this month, possibly trading back up to the 1.4700 area within the next six weeks.

A weekly close below 1.4170 would force us to adjust and one below 1.4000 to review.

Monthly Outlook for GBP

Comment: Having traded roughly between 1.6000 and 1.7000 for seven consecutive months it is difficult to get up the enthusiasm to suggest anything other than ‘more of the same’. Basing activity once again early this month should allow Cable to inch back up to 1.6800 within six weeks.

A weekly close below 1.5600 would force us to adjust and below 1.5200 to review.

Monthly Outlook for JPY

Comment: December’s rally from critical support at 85.00 (November low 84.82) has been far stronger than we had expected yet is undoubtedly corrective. Perhaps we should have expected this in terribly thin year-end markets with twitchy authorities eyeing key support. The series of lower highs has not been broken despite retracing 50% of last year’s decline and all aspects of the weekly Ichimoku ‘cloud’ chart suggest a short USD position against the Yen. Therefore we shall expect a new interim high to form early this month, dragging prices back down to 89.00/88.50.

A weekly close above 94.00 would cause us to review.

Monthly Outlook for EUR/GBP

Comment: A horizontal base on a rapidly thinning weekly Ichimoku ‘cloud’ suggests a downside test is imminent – probably within the next six weeks. A weekly close below 0.8850 should add to current bearish momentum and will probably see at-the-money implied volatility inch higher.

A weekly close above 0.9200 would force us to review.

Monthly Outlook for EUR/JPY

Comment: Such a pity to find EUR/JPY back in the middle of the range that has held for most of the last year. Moves this month should be random and probably hold between 129.00 and 134.00, most but not all of the time. Same old, same old.

A weekly close clearly above 135.00 forces us to adjust yet again.

Monthly Outlook for GBP/JPY

Comment: GBP/JPY bounced last week by a little more than we had allowed for, but this was probably to be expected in super-thin market conditions. We shall regard this as ‘noise’ and will be looking for a new interim top to form slowly this month. Eventually a re-test of the 140.00 area.

A weekly close above 151.00 forces us to review.

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