EUR: Possibly attempt tiny longs at 1.3640

Nicole Elliott from Mizuho Corporate Bank at 02/08/10

Comment: Bearish momentum stronger than it has been since September 2008 means the Euro is testing the lower edge of the weekly Ichimoku ‘cloud’. It is also more oversold than it has been since November 2008 and suddenly everybody’s new pet hate. Good futures volume over the last two weeks also suggest a pell mell rush into the recent move and out of long held positions. Be careful and watch for signs of a dramatic reversal, so that we form a big ‘spike low’ probably this week.

Strategy: Possibly attempt tiny longs at 1.3640; stop below 1.3570. Short term target 1.3750, then 1.3850.

Comment: Leading on the way down, a weekly close on Fibonacci 61% retracement support, but other Yen crosses are not looking quite so heavy as the Euro is singled out for particularly harsh treatment. This pair is still very oversold and bearish momentum is at its strongest in a year. Expect a little hesitation around 122.00 today and while we feel there is still room for another downside test other yen crosses have possibly greater potential.

Strategy: Possibly attempt the tiniest of shorts at 121.85; stop above 123.55. First target 121.55, maybe Friday’s low at 120.70.

Comment: Many writing off UK plc as QE ends and Cable manages a weekly close below the 38% Fibonacci retracement and the lowest price since May last year. There is a very high chance that this will be a ‘false break’ and ‘extension’ lower. Wait and watch for signs of forming a sort of ‘spike low’ which will push prices above the thin weekly Ichimoku ‘cloud’ within the next six weeks. Nerves of steel and patience needed, something futures traders obviously don’t have as very high volume and soaring open interest suggest many are rushing in.

Strategy: Possibly attempt tiny longs at 1.5575; stop well below 1.5500. Short term target 1.5750/1.5800.

Comment: Hesitation and slightly conflicting signals as prices swing between 61% and 50% Fibonacci support, and weekly moving averages turning to a long position. Expect yet more hesitation at this point this morning, maybe all day, with rallies hopefully capped by the 9-day moving average at 89.92.

Strategy: Attempt small shorts at 89.30/89.55; stop well above 90.00. Short term target 89.20, then 88.80/88.55.