Bank Recommendations

Deutsche Bank

EUR USD (1.3185) Given the recent assaults on the ECB by various French presidential candidates in recent days, one had to expect the Bank’s president to strike a note for independence in his speech to the European Parliament yesterday. He duly complied. And he talked about upside risks to inflation, money supply, liquidity, even about his opposition to abrupt moves in the euro. The statement was generally viewed as hawkish by market commentators but, at the same time, hardly unexpected. No doubt, many of them could have done a good job of writing the speech themselves. Thus, this was not the event that was likely to dissuade short-term traders from trying to exploit a new range. As a consequence, prices above $1.32 were rather used as a selling opportunity by the day-trading community even though, importantly, few had been able to predict that the euro would be as high as that on the previous day. The short-term crowd is not determining the euro’s development. More often, they find themselves being pushed around by longerterm flows (M&A, central banks, etc). The recent short-sales are not necessarily indicative of a fresh decline. As long as the singlecurrency holds above 1.3160 – a level that was tested overnight – we will continue to target 1.3650.

USD JPY (118.35) Our current objective remains at 119.80/90. Once again, we saw a very narrow range yesterday. But the dollar was able to establish itself at the upper end of this scale – the highest level in six weeks. The environment for carry-traders also improved this week: not only did we have the head of the BOJ making dovish sound-bites, but the one-month implied volatility also fell back towards its year-low. This development allows us to tighten the risk-limit to our bullish strategy once again, this time to 117.50.

EUR JPY (156.15) Although it corrected, the cross gave back only very little ground yesterday. This was certainly too little to allow those that had bet against it on the previous day to escape without loss. We suspect that shorts are still left stranded down in the 155.30/50 zone. This level, therefore, represents the best near-term support. We would try a bullish strategy there, with a risk-limit set immediately below, for a near-term push to 156.90/10.

GBP USD (1.9965) Our objective remains at 2.0275. The desire of market commentators to attribute Cable’s setback yesterday to ‘dovish’ BOE minutes owes much to hindsight; as the news was published, the Pound barely moved. The (short) sales came later in the day and drove Sterling within 25-pips of our 1.9600 downside risk-limit. Whilst this point holds, we will continue to favour higher prices. Intermediate resistances stands
today at 1.9795.

AUD USD (0.7850) The current target remains at 0.8050. The recovery continues to encounter some stickiness at our first 0.7860 resistance. But the supply there must be close to exhaustion now and we still believe that the upmove could even accelerate once it is overtaken. An intermediate upside hurdle stands at 0.7910. To the downside,
the risk-limit to the bullish view stands at 0.7800.

TECHINCAL ANALYSIS TEAM, JP MORGAN

EUR/USD: "Near term is over bought and we expect a pause after such a strong move yesterday. Pullbacks are a buy for a move to new highs in the days ahead."

EUR/JPY: "Generally we expect the yen to remain an under performer and the yen crosses to push higher. Euro/yen initial targets are now 157.50/158.00 yen, ahead of the 162/163 long term highs."

USD/CHF: "Correction to 1.2275 francs is over and we are heading to new lows, sell a retest of channel at 1.2175."

EUR/GBP: "Back to triangle support. Hopefully this holds and we see the euro/dollar lead the next leg higher."

MAX MCKEGG, TRL
EUR/USD: "Euro's corrective sell-off probably finds support about $1.3135/20 for resumption of the uptrend towards $1.3400 over coming days."

USD/JPY: "The dollar's advance persists and whilst now holding support around 118.20-118.00, maximum advance extends towards the 119.00 level."

USD/CHF: "Dollar's corrective recovery probably finds resistance about 2.210/30 francs for resumption of downtrend towards 1.1950 over coming days."

GBP/USD: "Sterling corrective sell off finds support in the late $1.9500's for the resumption of the uptrend towards $2.000 over coming days."