Weekly Technical Commentary
Nicole Elliott from Mizuho Corporate Bank at 12/14/09
Weekly Technical Commentary will be away until Monday the 11th January 2010
USD/JPY
Chart Levels:
Support 88.00..87.35..86.00..84.82.
Resistance 89.80..90.80..91.35..92.33.
The sharp rally from a multi-year low at 84.82 has turned into ‘triangle’ consolidation. The US dollar is no longer oversold and most elements of this chart still suggest a short USD/JPY position. Long term while below 92.00 downside pressure is maintained, while the closer we get to 85.00 the more the authorities will be tempted to intervene. In fact the early December high at 90.78 might in fact be a new lower interim high. Decent futures volume over the last two weeks suggests many are cutting out of stale positions ahead of expiry and year-end. These will have to be re-built next year.
Chart Levels:
Support 1.4585..1.4445..1.4280..1.4180.
Resistance 1.4770..1.4845..1.4900..1.5145.
Over the last two weeks the Euro’s drop has been bigger than most this year, admittedly against a background of fairly contained FX moves. It is undoubtedly corrective, here and in a whole raft of other major currencies. Therefore we shall be looking for the daily Ichimoku ‘cloud’, combined with medium term Fibonacci retracement support, to help form an interim base over the next fortnight, here and in the others too, as this is a USD move. Note that all elements on this weekly chart point to a core long Euro position. Futures volume over the last few weeks has been close to record highs, suggesting many are throwing in the towel before delivery and year-end. As with the yen, they will need rebuilding next year.
Chart Levels:
Support 128.75..126.95..125.65..124.35.
Resistance 130.65..131.00..132.00..134.55
Back down to the lower edge of the broad band that has held for most of this year and which now coincides with the lower edge of the huge weekly Ichimoku ‘cloud’. The Euro is not oversold against the yen and momentum is steadily bearish, while weekly moving averages still suggest a short position. Hopefully we will get the decisive weekly break now in super-thin year-end markets. We expect a similar effect with all other Yen crosses with these dragging each other lower. Probably in Q1 2010 this cross will re-test key support just under 115.00, and then move sideways.
Chart Levels:
Support 143.00..142.00..140.00..139.25.
Resistance 145.65..146.50..149.00..151.60.
Retreating from the top of the ‘triangle’ formation so that prices are now trading just under the lower edge of a massive weekly Ichimoku ‘cloud’. Weekly moving averages still point to holding shorts and hopefully the neat series of descending weekly highs will be maintained so that we drop below 38% Fibonacci support very late this week or later this month. Sterling is not oversold against the yen though momentum is only just bearish. A monthly close below 140.00 would probably cause a sudden slide to the 130.00 area. Being the yen cross closest to the record low 118.80 of January 2009, GBP/JPY may have less downside scope than others.
Chart Levels:
Support 1.6200..1.6100..1.5900..1.5700.
Resistance 1.6400..1.6600..1.6800..1.7044.
An eighth consecutive week consolidating just under the top of a very large Ichimoku ‘cloud’, but note that moving averages have crossed to a short position. Excellent futures volume last week suggests many are squaring up. Hopefully before the end of this year a weekly close above the top of the ‘cloud’ might add some much-needed bullish momentum, while a break above this year’s high at 1.7044 is needed to set off the next big rally, forcing many into short-covering and reviewing their outlook. As we expect Sterling to do better than many other currencies next year, albeit slowly, Cable should lead the way to generalised USD weakness.
Chart Levels:
Support 0.8980..0.8895..0.8833..0.8750.
Resistance 0.9070..0.9125..0.9155..0.9240.
Slow work but Fibonacci resistance and the top of a large daily Ichimoku ‘cloud’ nudged Euro/Sterling marginally lower as all and sundry write off UK plc. One worry is that the ‘cloud’ thins dramatically at Christmas; another surprise is that momentum remains stubbornly bullish. These conflicting signals bring with them the possibility that prices might move broadly sideways, in a yet to be determined band, for many more months and while above the pivotal 0.8400 the risk of sudden sterling weakness against the Euro remains. Despite this we feel that the intermediate trend, over the next couple of months, is for this pair to drift down towards 0.8500 again, probably with much sideways consolidation at the 0.8750 level.
