Bank Recommendations

Deutsche Bank

EUR USD (1.3025) With the dollar having defied strong US data lately, for some it meant that the upside had to be open for the Euro. Thus when it cracked the $1.30 level, accompanied by hawkish ECB comments and good French consumer spending and Euro zone industrial orders data, it just served as another confirmation that a rally was underway. There was even a rumour that the US was planning to attack Iran by April that really got the euro out of the blocks. This seems to be nothing more than a shot in the dark and rather confirms the need for an argument to support the belief in the market that the euro might rally; in the past, the dollar would just as readily strengthened on this type of news. In fact the appeal of such a rumour lies in the ability of this kind of event to cause investors to re-evaluate their risk appetite. The market is already skittish about where the search for yield is taking us, credit spreads, carry-trades, etc. Hence, traders are particularly sensitive to these kinds of rumour. We still expect the Euro to be pushed lower, but we may have already seen some supply were we expecting ahead of the point where we planned to enter a bearish strategy. We would therefore reserve our bearishness for a higher bounce to 1.3110 with a risk limit at 1.3150 (also the point for a stop-and-reverse strategy). Alternatively one could also wait for a fresh decline below 1.2930 to turn bearish. The target for both scenarios would be 126.50.

USD JPY (120.90) The BoJ Governor yesterday said that he was not sure when the different convictions of his committee members would change. Is this a further sign that Fukui has no control over them? However, it was his comments about the effects of a sudden liquidation of carry- trades that are currently haunting investors. Traders became jittery this morning as the dollar came under pressure but, as we already mentioned, market participants have been half expecting this. We remain bullish for target 123.00. Further weakness must be guarded by our 120.65 risk-limit. Below there, 119.70 is the critical point.

EUR JPY (158.50) The single currency climbed to a new high yesterday, but it also suffered a setback this morning. Nevertheless, we keep our bullish objective in place at 161.00. For today, the tightened risk-limit stands at 156.90.

GBP USD (1.9775) Sterling bulls are out in full force and enjoyed the latest comments by the BoE Governor who said that both inflation and growth risks lie on the upside. The BOE has essentially confirmed that it is behind the curve, which explains why so many are squeezing in hike forecasts this year. It is almost hard to believe that it was hardly six month ago when an MPC member voted for a rate cut. Cable skyrocketed to a 15 year high. We still look out for further gains to our 2.0100 target. Any weakness should not violate our 1.9690 risk-limit.

AUD USD (0.7825) After gains to 0.7935, the AUD fell out of favor on the release of CPI data and fell below our risk-limit. We reset the outlook to neutral. Below 0.7810 the risk remains for further weakness to 0.7730. Overhead, supply lurks at 0.7875 and at 0.7935.

STEVE WESIAK, ABN AMRO PRIVATE BANKING

EUR/USD: "The base continues to pan out and $1.3002 has been established as support. Holding above it calls for a rise to $1.3082, where a small dip could occur before the market rallies up to the $1.3133 target. At that point, the upside bias could fizzle out. On the downside, if prices break below $1.3002, then the upward sloping line at $1.2930 will likely get hit. If that fails, and especially the nearby $1.2916 low, then the bears should be emboldened to try and knock out the $1.2867 bottom. Below it targets $1.2763 and as far as $1.2684 before the dust starts to settle.”

USD/JPY: Prices were slammed lower after coming close to the potent 121.88 resistance. The decline could easily reach 120.34 and as far as 119.68 before any new bottom forms. The steep drop makes resistance a bit far away, which is the mentioned 121.88 barrier. Taking it out should see prices shoot up to 124.50.

GBP/USD: "The bulls are already showing caution before the massive $2.000-2.0225 barrier. The current retreat could make it to the $1.9665 Fibonacci support before buyers step in again. Under that will likely tempt sellers to shoot for $1.9532. On the upside, above the $1.9916 peak targets $2.000, where another round of selling could kick in."

EUR/JPY: "The market set a new all-time high at 158.51 and as usual, quickly pulled back. This has room towards 156.36, where a new base could start to take shape. Under it, though, calls for a decline to the tested 155.09. On the upside, the air is starting to get thin before a projected possible top at 159.00. Taking it out though, targets up to an old Deutschmark/yen top at 162.49."

EUR/GBP: "The bears heavily hit support but buyers were lying in wait just below it at 65.37 pence. A slight reversal bar formed there, which should be enough to propel prices up to the 66.71 former low. Holding under that keeps the downtrend intact, but if it were taken out then the market will have room to the 67.62 level. On the downside, violating 65.37 targets at least 65.15 but more likely 64.65."

AUD/USD: "A head-and-shoulders top formed and holding under the last shoulder at US$0.7937 calls for a break below the US$0.7762 neckline and a move down to the US$0.7616 low. That is also the 38.2 percent Fibonacci level of the US$0.7106 to US$0.7980 upswing and thus a good place for a bounce to kick in, likely to test US$0.7762 as new resistance. This bearish scenario only ends with a break above US$0.7937, which would imply that the bulls are getting ready to ram US$0.8005."

NICOLE ELIOTT, MIZUHO CORPORATE BANK

EUR/USD: "Waking up a little at last but still needs a sustained break above $1.3065 to set off a few light buy stops and turn momentum bullish; it would also hint that an interim low is in place. The Euro is not overbought and should be helped along by other currencies doing something similar. For this morning, allow for a little more work around $1.3030, then hopefully bursting higher through $1.3065 to $1.3120."

EUR/JPY: "Retreating from a new record high at 158.62 and likely to hold below here all day and maybe for several days. Do not jump the gun and assume candles will be bearish at the end of the day or the end of the week/month. For this morning, allow for consolidation between 158.00 and 157.00. Dips to 156.50/156.00 are seen as buying opportunities for a rally later on to new record highs."

USD/JPY: "Small signs of instability here and in some yen crosses. This morning's sell-off could result in a bearish engulfing candle, with the break below 121.00 setting off some sell stops. The US dollar is no longer overbought and bullish momentum has dipped a little. We continue to urge extreme caution, as this month's move to historically high levels may well create a spike high. For this morning, allow for more work below 121.50, moving down to 120.00 and maybe 120.00 late this week."