We now remain positive on AUD and NOK

Per-Erik Karlsson from Avantage Financial GMBH at 10/21/09

S&P 500 December futures tested 1100 resistance before the US open, but has since moved lower following the release of lower than expected US PPI data. Strong bullish momentum intact above the 1075 level (former key resistance and former break out level). A few weakness signs on the Gold chart and could fall back and test the break out level of 1033 near term. We will monitor Gold closely over the next sessions to potentially set up a short trade. JPY weaker again this morning as the equities rally and risk appetite increase for carry trades, main beneficiaries are AUDJPY, NZD and GBPJPY. GBP has been very bid last few sessions after the GBPUSD had a successful test of the key 1.5720 support area (Dec 08 high) last week and the Cable has now a key down trend line coming in at 1.65. Lots of negative press out last few days and we agree that the outlook for GBP is not very good and will most likely remain weak vs. Euro for the rest of the year. Euro was pushing to break 1.50 again this morning, but so far been held back by heavy defending of an options barrier at 1.5050 that expires today. We expect lots of stops above 1.50, so we are looking to buy a 1.50 break to test how bullish the market is and see if the stop festival gets triggered. A 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, which would most likely pressure Gold as well. Crude making it to 80.35 in December contract this morning, we are looking for potential short set up in Crude. We pay attention to the fact that yesterday was a very light volume up day in Crude, this is potential very weak bar as lack of volume shows lack of interest to participate in the rally, which is certainly not good for bulls. If the market does not want to buy up days it cannot go very much higher. We will follow today’s price action closely to see if intraday charts signal a potential top as well. NAT Gas looks very strong in our opinion after the successful test of 4.33 support last week and back above 5 level this morning. As noted yesterday Nat Gas looks positive for another run at the 5.10 level and a break above 5.10 would target 5.20 (Dec 08 low). Looking at the chart the key resistance area in Nat Gas futures is now all the way up at 6.24 ( Jan 09 high). Soybeans, wheat and corn have shown some weakness following the huge run up, we are looking for slightly higher levels to get short, unless the support levels of these contracts give in. Still uncertainties about how much damage the recent cold weather have done to the crops, but would not be surprised if the damage is much less than feared. NZD continues to perform strongly, but we think NZD is overvalued compared to the out and we are favoring shorts vs. a basket of currencies, but maybe not USD just yet as the pace of the selloff in USD still looks strong. More earnings out today and it seems like the equity markets are once again dictating the trade in FX and commodities with increase in risk appetite putting pressure on USD and supporting commodities and vice versa. Bank of Canada just left rates unchanged with quite negative comments regarding recent CAD strength. BoC also indicated that rates would not be hike in 2009, which is a clear negative for CAD and we drop CAD from our mostly favored FX list following these comments. We now remain positive on AUD and NOK. Following this statement by BoC we are looking at potential short in CAD vs. other majors.

Technical’s

Euro: Took out 1.4850 key resistance last week and 1.50 is next up as long as 1.4830 support holds. Option barriers have held the rate below 1.50 so far, but we expect to see a break above 1.50 near term.

Cable: Bullish reversal after hitting 1.5720 (Dec 08 high) support Tuesday last week, which is basically very bullish development. Next target is now for a run back towards the top of the recent range up at 1.6740.

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 are over. 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.
Yesterday’s price action shows weakness as the it made a new high of 0.9274, but falling back and closing unchanged. Had to be some selling to make it close off the highs.

USDCAD: Above 1.04 after BoC interest rate announcement today and a close above 1.04 today would confirm a reversal and open for a rally towards 1.0590 and possibly 1.0960 near term.

EURJPY: Traded above the 135.48 resistance Friday and next level to the upside is now 136.09. Key resistance is up at 138.72 and we look for a test of this level over the next weeks.

GBPJPY: Huge rally last few days and break above the 144.54 key resistance last week have now turned this pair bullish. The next resistance level is 150.37 followed by 153.26 (September 09 high).

AUDJPY: Looking for a test of 85 next.