EUR: Possibly attempt small longs at 1.3930

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

Comment: Over the last month the Euro has lost ground against every single major currency except the Brazilian real – it is not indicative of what is happening generally in the FX market. We continue to watch for signs of forming an interim low this month. The Euro is terribly oversold and futures volume last week was close to a record high suggesting many are being forced out of core positions.

Strategy: Possibly attempt small longs at 1.3930; stop below 1.3800. Short term target 1.4000, then 1.4180.

Comment: Bouncing quite strongly from a recent low at 124.45, just ahead of May’s low at 124.38, and likely to hold above here again today and maybe all week. Nevertheless the Euro is still oversold and bearish momentum has eased. All yen crosses are still expected to trade down this month.

Strategy: Attempt small shorts at 126.25; stop above 127.15. First target 125.65, then 124.50.

Comment: We continue to watch for signs of forming an interim low this month, but be aware this might be a very slow process, with yesterday’s ‘spike low’ at 1.5850 (close to December and January’s lows) the first small sign that it might have started already. No need to rush as we have been in a ten cent range for eight months.

Strategy: Attempt very small longs at 1.5950; stop below 1.5800. Short term target 1.6265/1.6300.

Comment: Very dreary as we continue to hover above the 50% Fibonacci retracement support and the top of a broadening Ichimoku ‘cloud’, and now trading between the 9-day and 26-day moving averages. 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 90.65; stop well above 91.00. Short term target 89.85, eventually 88.50/88.25.