EUR/JPY: Possibly attempt tiny shorts at 133.20; stop above 135.55

Nicole Elliott from Mizuho Corporate Bank at 10/29/09

Comment: Giving up 61% of the most recent gains prompting some to talk about a major turn in the US dollar’s fortunes. This is very premature as the Euro remains within its ‘channel’, moving averages and the Ichimoku ‘cloud’ suggesting a long Euro position. The Euro is almost oversold and momentum is nil. Very good volume in the futures market suggests those recently arrived at the party are bailing out of overly-aggressive positions. Allow for several weeks’ worth of correction and consolidation below 1.5064, this year’s high. Watch for signs of forming another interim base.

Strategy: Possibly attempt tiny longs at 1.4700; stop below 1.4650. Short term target 1.4800, maybe 1.4900.

Comment: Yen crosses dropping even faster than hoped this week, BRL/JPY, NOK/JPY and NZD/JPY leading having previously been the ones that climbed the highest. EUR/JPY is back down to the middle of this year’s very large ‘triangle’ and just below a thin Ichimoku ‘cloud’. Expect some hesitation here today and maybe tomorrow as the Euro is almost oversold against the Yen. Then down again next month with a medium/longer term target at 125.00.

Strategy: Possibly attempt tiny shorts at 133.20; stop above 135.55. Short term target 132.00, maybe 131.00.

Comment: Incredibly stable, trapped between a strengthening US dollar and a strengthening pound. Holding above first Fibonacci support and set to test the top of a very thin Ichimoku ‘cloud’. Cable is no longer overbought though momentum is zero. Allow for more of the same today noting that the longer we hold above 1.6200 the more upside pressure ought to build.

Strategy: Attempt longs at 1.6420; stop well below 1.6200. First target 1.6440 then 1.6650.

Comment: Retreating from the 38% Fibonacci retracement resistance and the increasingly large Ichimoku ‘cloud’, dropping to the 26-day average at 90.17. Expect it to try and hold above here this morning and maybe all day, including repeated cautious probing of 90.00. Note that the US dollar is not oversold and that momentum has yet to turn bearish so plenty of further downside pressure left over for next month.

Strategy: Attempt shorts at 90.45, adding to 91.15; stop above 91.85. Short term target 90.20, 89.00 quite a bit later.