Bank Recommendations

Deutsche Bank

EUR USD (1.2990) The single-currency’s reaction to yesterday’s US CPI data was practically identical to that which followed the PPI data 24-hours earlier: the slightly hotter than expected number caused an immediate dip that was promptly halted around the $1.29 level – literally within the first five minutes. Such unflinching demand is typically the result of day-trader profit-taking on shorts or buying interest from longer-term sources; both are indifferent about whether the price falls further thereafter or not. However, as day-traders have shown very little interest in selling the euro short this week (or last) we are rather tempted to consider the latter. Finally, the only difference between the two sessions was that yesterday’s rebound carried a little further – probably aided by rumours of a military altercation between the US and Iran. As a consequence, the risk-limit of our bearish scenario was overstepped in early trade this morning. Our former risk-limit was, sadly, not the best supply point yesterday. It had already been tested once and the level 1.3040 was likely to be better. Today, an additional hurdle at 1.3090 is apparent. Thus we cannot treat the euro as bullish. To the downside, support is unreliable (one can never count on long-term demand). The first good point that we can identify is at 1.2815.

USD JPY (121.30) The fallout from the BOJ’s decision to keep rates on hold continued to rain down yesterday. Although many agreed that ‘unchanged’ was the right outcome from an economic perspective, the view that the Japanese government had stepped on the Bank’s independence seemed to make investors a little angry. They claim that interest rate policy may now be short-sighted and that Fukui might be the weak link. One cynic suggested that Fukui’s vote for no change might be payback for the support he received from the finance ministry when he was plagued by scandal last year. Others indicate that he might be losing control over the committee because he was unable to secure a unanimous vote. We suspect that some of these disgruntled central bank watchers are would-be carry-traders who were hoping to get a hike-inspired correction in order to sell yen at better levels. This is no longer possible, so we would expect to see dip buyers in the dollar ahead of 120.50, the tightened risk-limit to our current bullish scenario. The objective remains at 123.00 but, for today, one should expect some earlier supply at 121.90.

EUR JPY (157.50) The current target is 161.00. For today, an initial upside hurdle stands at 157.80. The risk-limit is set at 156.30.

GBP USD (1.9745) Yesterday’s post-CPI decline extended a tick too far for our latest bullish strategy yesterday (apologies). However, the Pound’s positive orientation was not irreparably damaged. To re-target 2.0100, we need first to await a modest dip to 1.9710 and to set a risk-limit at 1.9640.

AUD USD (0.7890) The A$ overstepped the bullish trigger this morning and we currently target 0.8050. The first hurdle on the way higher will be 0.7960. To the downside, the best nearby support also marks our risk-limit, 0.7860.

TECHNICAL ANALYSTS, KBC

EUR/USD: "Below the neckline of a short-term double top ($1.3051) and has retested the November 2006 break-up on weekly charts ($1.2877), now trying to extend above the neckline of a short-term double bottom ($1.2990). First support area at $1.2946 (daily short-term moving average), with next levels at $1.2918 (daily envelope), ahead of $1.2896 (week low) and $1.2865 (last week's low) -- tough."

EUR/GBP: "First support area at 65.64 pence (today's low), with next levels at 65.60/55, ahead of 65.41/38 (neckline long-term daily double bottom plus fourth wave daily plus daily envelope/daily Bollinger bottom), considered as range bottom, amid short-term oversold readings. First resistance area at 65.74/78 pence."

EUR/JPY: "Dark cloud cover at high has sent the pair retesting the broken long-term daily up trend line off 2000 low (154.12 today), which managed to trigger strong rebound above the neckline of a short-term double bottom (156.33). First resistance area at 157.69."

MAX MCKEGG, TRL

EUR/USD: "Having found support around $1.2900 target, looking for uptrend to extend on to $1.3050 en route to the $1.3300 level over coming days."

USD/JPY: "The dollar's uptrend persists and whilst now holding support at 121.00, 120.80 yen maximum yields advance onto 122.00."

USD/CHF: "Having been rejected from the mid-1.2500s reistance, about 1.2500/15 francs now contains, for sell off below 1.2420, towards 1.2340 and 1.2270."

GBP/USD: "Sterling's uptrend developing well and with support around $1.9700 level, looking for advance onto mid-$1.9800's en route to $2.0000 and higher."