EUR: Possibly attempt small longs at 1.4710; stop below 1.4600

Nicole Elliott from Mizuho Corporate Bank at 12/09/09

Comment: Below ‘channel’ support, trading in the middle of the Ichimoku ‘cloud’, though above retracement support and thereby confusing many. Knee-jerk reactions in thin year-end markets will probably rattle nerves. The idea that the US dollar is the ‘risk averse’ trade is risible.

Strategy: Possibly attempt small longs at 1.4710; stop below 1.4600. Short term target 1.4800, then 1.5000.

Comment: Sooner than we had hoped Yen crosses have reversed most or all of last week’s gains, underlying the fact that the trend is more likely to be for a stronger Yen. Now hovering just under the lower edge of a very messy band that has held for most of this year. A weekly close below 127.75 might tip the balance and push this one down sharply at year-end.

Strategy: Attempt small shorts at 129.35, adding to 130.50; stop above 131.15. Cover ahead of 127.00.

Comment: Dropping below the bottom of the ‘flag’ and the Ichimoku ‘cloud’ balances as we retrace 61% of the previous rally, the US dollar gaining against all currencies this week, hardest hit the Swedish krona. The move is corrective so watch once again for signs of forming an interim base today and maybe through to year-end. Beware thin year-end markets.

Strategy: Attempt small longs at 1.6200; stop below 1.6100. First target 1.6450 then 1.6700.

Comment: Reversing all of Friday’s rally and hovering back at the 26-day moving average. Expect hesitation here today, around the 50% retracement and the 9-day moving average at 87.80. A sustained break below here targets key support around 85.00.

Strategy: Attempt small shorts at 88.05, adding to 89.00; stop above 89.60. Short term target 88.00, then 86.00.