Sunday, June 28, 2009

Major currencies (EUR, GBP, CHF, JPY) sustain recent trends against the USD

EUR/USD & GBP/USD both closed above their 21-Day MAs and continue to move inside their Uptrend channels. This sticks well with the USD Index bearish close below 80 on weekly basis.

Bouncing off the Support trendlines next week we should see moves in Euro to 1.45 and in Sterling up to 1.74 targeting the Channel tops.

Technical picture in USD/CHF is somewhat different since we witnessed strong intervention maneouvers by SNB (and also allegedly through BIS) to weaken the Swiss Franc. The Swiss currency was used as a carry vehicle in the previous credit cycle and after the first stage of the global financial crisis we saw those funds repatriated back. So it's no surprise that those funds are now again going out in search for alpha return.

Downside support in USD/CHF is at the pivotal 1.08 coinciding with the 21-Day MA. Upside however is very important as there are much touted big stops above the important 1.10 level where is the Resistance trendline.

USD/JPY was rejected both by the 21 and 200-Day MAs which is pretty bearish. This view is accentuated by the Descening Triangle which suggest Continuation of the move and is prone in most cases to break from the Flat side.

We should see a fierce battle from BOJ / MOF / Kampo (all names that are always cited to stand behing the moved in Yen) to Support the critical 94.00 level. Technical picture suggests that if we see a break and confirmed close below 94 that we shoul see the 6 big figures range rotating to the downside with a target around the 88.00 lows..

At this moment it is a long shot however as we observe volatility and credit spreads at their lows as there wasn't any credit crunch 3-4 months ago it is safe to assume there will be a break in stock market some time soon. I will hold to that scenario at least until I see the Bond market rally is still intact.

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