Bank Recommendations

Deutsche Bank

EUR USD (1.2965) After dawdling for much of the day in a 30 pip range just above $1.29 the euro ultimately rebounded yesterday. The move probably did day-traders no harm at all, as many were already cautiously bullish anyway. This optimism was originally fuelled by hawkishness on eurozone rate outlook, but a second day of rumours of official bids and talk of a foreign partial acquisition of the European industrial giant, EADS, merely added to the mix. Given that we have had some hints of long-term demand at that level over the last fortnight, there may well be some truth in these suggestions. Later in the day, comments by US Treasury Secretary Paulson, who is of the belief that inflation is at a ‘manageable level’, may also have encouraged some euro-bullishness in the market. Despite this however, our first resistance at 1.2970, the risk-limit of our bearish scenario, was able to cap the single-currency’s advance on a number of occasions. Against a backdrop of falling volatility, a halfpercent rally seems to be sufficient even for the bulls. Our current target remains therefore at 1.2650. Although some of expected supply at 1.2970 must now be spent, this (weakened) level remains the upside limit to the strategy. Above there, the euro would again be in completely neutral territory; to become bullish, we would need to see a break of 1.3105. To the downside, the best nearby demand stands at 1.2860.

USD JPY (121.95) The current target remains 123.60. The dollar had no fear of its four-year high yesterday, as it hovered around the peaks for much of the session. Only later in day did it succumb to across-the-board dollar weakness. The dip did not violate 121.50, however, so this level remains the risk-limit to the bullish view. The critical downside point now stands at 120.25.

EUR JPY (157.80) The prospect of yen weakness appearing on the agenda of the forthcoming G7 meeting was resuscitated yesterday following comments by two European finance ministers. Day-traders were undoubtedly tempted in short-positions in the cross in anticipation of a similar correction to that which occurred last week. But, this time it did not work; the euro was squeezed up to our first 157.90 resistance at the end of the day. We consider supply at this point to be spent now, which means that the next overhead hurdle stands at 158.50. As mentioned yesterday, the going beyond this point ought to become much easier (160.10), although a poor risk-reward profile might make a rally difficult to exploit. Good supports remains sparse (even more so now that the shorts have been squeezed out). They stand at 156.80 and at 154.00 (critical).

GBP USD (1.9625) The current target remains 1.9300. However, the Pound recovered smartly from a two-week low yesterday and is already threatening our 1.9680 resistance. This point is not particularly strong, but remains the guardian for the bearish view. Beyond, Sterling would be neutral again. The bullish trigger stands at 1.9755.

AUD USD (0.7730) The current objective remains at 0.7615. The A$ has already consumed what we consider to be the best nearby support. Weaker demand ahead of the target level now only comes in at 0.7650. To the upside, the risk-limit to the bearish view should be lowered now to 0.7770. All price levels mentioned in this report require a 10-pip break to be invalidated.

CLAUDE MATTERN, BNP PARIBAS

EUR/USD: "The currency pair is seen between $1.2975 and $1.2945. A retreat below that level would argue for a new test of support. Above $1.2975, the next main level is at $1.3000. Euro/dollar remains poised between $1.29 and $1.30, on a wait-and-see position."

EUR/JPY: "Rather unpersuaded by the second attack of the downside, (the pair) is returning towards its former high, with the hourly resistance line at 158.80 yen. The currency pair is finding some resistance at 158.05, the first top seen at the beginning of the year. The daily indicators remain neutral, but above zero. The hourly ones are signalling resistance."

EUR/GBP: "Seen between 66.25 and 65.90 pence at first, finding resistance. A rebound above 66.25, in direction of 66.50 is expected later on."

MAX MCKEGG, TRL INDEX

EUR/USD: "Euro's recovery persists and with support now about $1.2950/30, looking for a rally towards next resistance around mid-$1.3000s."

USD/JPY: "Dollar's advance fell just short of target. ... Resistance at 121.80/122.00 yen to yield decline to 121.45/30, then to 121.00."

USD/CHF: "Waiting for clearer signal to provide next worthwhile trading opportunity."

GBP/USD: "Support now at $1.9615/00, looking for a rally to $1.9680, enroute to mid-$1.9700's."