Bank Recommendations

Deutsche Bank

EUR USD (1.2905) Although many observers were of the opinion that some disappointing US economic data were probably overdue, the market was surprised by a resounding set of durable goods and new home sales figures on Friday. The dollar rallied, but could not push the euro much below $1.29. This repeated a pattern seen in the previous week, following the publication of US PPI and CPI numbers. It seems that the dollar does respond to data that increases the chance of a Fed hike (even when the hawkish slant is not in the headline figure, like for last week’s existing home sales number) as long as the euro is not around $1.29. The long-term demand that we pointed to at that level a fortnight ago might still be at work. Or it could be that short-term accounts are betting that this will be case. At least, traders still firmly insist on the imminence of ECB further tightening. These views are animated by the continued growth of eurozone M3 (further warnings about this were made by Weber, the tireless ECB hawk in Davos on Friday) and by the belief that the zone’s inflation will jump back above two percent. Some commentators – revealing an apparent appetite for central bank surprises – suggest that this might mean that the next step comes already in February. Our current target remains at 1.2650. The risk-limit to the bearish orientation should now be tightened to 1.2970.

USD JPY (121.95) Disappointing Japanese retail sales numbers this morning, combined with Friday’s weaker-than-expected CPI number have thrown a positive light on the BOJ: with hindsight the split-decision to leave rates unchanged might have been justified after all. Instead, criticism has been heaped on the Japanese PM, Abe, whose parliamentary speech was badly received by political commentators. The dollar reacted by jumping beyond our bullish trigger and we now target 123.60 (higher than previously indicated). The risk-limit to the new strategy is set at 121.50.

EUR JPY (157.40) Following a session of consolidation on Friday, the cross responded to soft Japanese data by climbing a half-percent this morning. We suspect that many would-be carrytraders have had ample opportunity to step into the trade, which means that the euro should face stern resistance at 157.90 and at 158.50. Only above the latter would the upside become easier (160.10), although a poor risk-reward profile might make this difficult to exploit. Good supports are few and far between; ahead of 154.00/10, the critical downside point, the only notable point stands at 156.10.

GBP USD (1.9575) Cable pursued its downside path on Friday and fell below the level
that marked the low a fortnight ago. UK house prices, which rose at the fastest annual pace in over three years in January, apparently did not fuel any additional inflation fears, especially since strong gains in London masked a weaker national picture. The continued drift lower triggered us into a new bearish position. The target stands at 1.9300. Intermediate support emerges at 1.9490. The risk-limit is set at 1.9680 (for risk-reward reasons, as this point is not particularly strong).

AUD USD (0.7735) The AUD still holds a tight range just above our 0.7720/25 support; a point that has gradually weakened. The current target remains at 0.7610/15 with the risk-limit at 0.7780.

ANDY HART, COMMERZBANK
EUR/USD: "The Euro edged lower again yesterday within its recent consolidation phase. We continue to favour further losses whilst $1.3000/1.3055 key resistance area continues to cap the market. The recent January low of $1.2865 ultimately looks to erode this week to initially challenge $1.2770 within the next one to three weeks. Very near term a break below $1.2920 confirms the recent consolidation phase is finally over and $1.2865 is on target."

USD/CHF: "USD/CHF continues to edge towards key resistance at 1.2540/60 francs. Longer-term daily momentum continues to rise above its June and November 2006 highs supportive of the market breaking higher. Key support at 1.2355/80 still favours to contain the downside again this week as 1.2540/60 is exposed. Shorter-term a break higher looks to target gains to initially 1.2635 en route a test of major resistance at 1.2770."

GBP/USD: "The bigger picture for sterling continues to imply recent gains are range topping as daily momentum continues to form lower lows and lower highs. We maintain that a break below $1.9555/65 is ultimately required to confirm an interim top is in place and reassert downside pressure towards $1.9340/50 then $1.9260 again shorter-term. Very near term however we favour tests into the key resistance of $1.9780/1.9845 to continue to hold as the market looks to range lower to initially test key $1.9670 en route to challenge $1.9555/65 nearer term."

USD/JPY: "USD/JPY continues to edge higher and looks to be the leading currency pair to currently watch. The market posted its first daily close above key resistance at 121.40 yen yesterday along with longer-term momentum confirming the recent price break up. Shorter-term we therefore continue to look for further gains to initially test interim resistance at 122.40/60 en route 125.00 whilst ideally 119.85 now holds."

EUR/JPY: "Whilst EUR/JPY continues to hold above key support at 155.95/156.50 yen we maintain our positive view. The daily relative strength indicator (RSI) momentum oscillator continues to rise; implies pressure remains on the upside. The recent 158.05 January high continues to look exposed shorter-term for gains to 160.00 yen whilst ideally 155.95/156.50 yen holds."

EUR/GBP: "The euro/sterling is close to target now at 65.30/65.45 pence. We favour this area will stall the market but only temporarily as we maintain the longer-term downtrend is fully entrenched. Hence, whilst 65.30/65.45 area holds, we view corrective risk to 66.00/66.10 is once again likely. However we continue to favour corrections will be limited to 66.00 and lead to further probing of the 65.30/65.45 support as a 65.30/65.45 to 66.00/66.10 neutral to negative range is considered to be dominate."

EUR/CHF: "The euro/franc continues to contract between 1.6150/1.6215 franc two-month support line and 10-month channel resistance. We continue to view this coiling/contraction as positive for the market shorter term. Nearer term however the daily RSI momentum oscillator is indicated to be neutral to positive however and doesn't confirm for a break-up in the market just yet. An eventual break of 1.6215 targets further shorter term gains to 1.6280 whilst 1.6150 rising support holds."

SEB MERCHANT BANKING
EUR/USD: "The market still refuses to go nowhere. If this is a base for renewed upward pressure, buying must be seen within shortly or sellers will return, attacking the $1.2860/95 support zone. A break of $1.2920 will be an early warning of a downside test."

EUR/JPY: "Despite Friday's doji candle, the market resumed its advance yesterday. A small sideways range overnight should soon exit to the topside, challenging the prior high point, 158.06 yen."

GBP/JPY: "The impulsive advance (acceleration) seen since Jan. 8 low point, continued yesterday and the cross has now arrived at the 1998 top area. If any reaction should be seen, it will most likely take place here. If passed, we see the 250 area come into play."