Thursday, August 12, 2010

JPY: Cautious downside testing at the lowest levels in 15 years


Forex Special

EUR

Comment: Painfully low volume on one of the biggest daily moves this year underlines how thin summer markets can be. Dropping to the 26-day moving average and maybe the Lagging Span will find support from the ‘cloud’ around 1.2900. The Euro is no longer overbought against the dollar but momentum is zero. Watch for signs of forming an interim base if not this week then over the next three.
Strategy: Attempt longs 1.2900; stop below 1.2780. First target 1.3025, then 1.3150.

EUR/JPY

Comment: Yen crosses are all trading lower, CAD/JPY and SGD/JPY to this year’s lowest levels. EUR/JPY has dropped below its very large daily Ichimoku ‘cloud’ and moving averages today have crossed to a sell. Allow for a nasty test of this year’s lower levels as always subject to sharp rallies after that.
Strategy: Possibly attempt shorts at 110.00 but only if prepared to add to 111.00; stop above 112.00. First target 109.25/108.80, maybe 108.00.

GBP

Comment: Holding up a little bit better than some which is a little surprising considering it has had one of the strongest rallies since May. Perhaps it has something to do with the premium, and the persistent bid tone, that ‘quality’ financial instruments are currently attracting. Cable is no longer overbought though bullish momentum has retreated. Watch to see if trendline support holds.
Strategy: Attempt small longs at 1.5670; stop below 1.5540. First target 1.5900, then 1.6000.

JPY

Comment: Cautious downside testing at the lowest levels in 15 years and the authorities are pondering what to do about the mess – yet again. All elements of this daily Ichimoku ‘cloud’ chart suggest a short position, the 9-day average pushing down steadily, but caution is warranted as we are currently working inside a potential ‘wedge’ formation. Interestingly the US dollar is not oversold against the yen and that momentum is steadily, not dramatically, bearish. Nor, in relative terms, is the yen ‘expensive’ against the greenback and one must beware the label of ‘currency manipulator’.
Strategy: Attempt small shorts at 85.35, adding to 85.85; stop well above 86.25. First target 84.82, then more keeping in mind the record low was 79.75 in 1995.

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