Bank Recommendations 24.11.2006

Deutsche Bank

EUR USD (1.2960) The German IFO survey results were the only news of the day yesterday. The very strong showing prompted an immediate move higher for eurozone yields and for the euro, even though IFO insiders were of the opinion that growth would remain only as long as the single-currency remained below $1.35 and ECB rates below 3.5%. Finally, spot prices were unable to overtake the 1.2975 hurdle that we identified in our previous report. It subsequently slipped back modestly as the expected supply there spilled into the market. The dollar was generally weaker yesterday anyway, which suggests that this euro move was rather a continuation of the squeeze that started on Tuesday. And it probably involves the same protagonists, namely short-term range traders. For evidence that the recent development is attracting a wider audience, it is necessary to see the euro break this (now weaker) overhead hurdle. We would embark on a new bullish target at 1.3290 following a surpass of this point, although we do note some intermediate supply at 1.3050 for today. As before, we would also take a bet on an eventual bullish outcome in case of a modest dip back to 1.2895. In this case however, we would respect a very tight risk-limit at 1.2860.

USD JPY (116.30) There was no respite for the dollar yesterday. It continued to drift lower and even violated our key support. We currently look, therefore, for further weakness to 113.50. News concerning China may now start to pre-occupy carry traders. This is the second consecutive month where the trade has not really earned them anything. So to hear now that Beijing has decided to broaden the daily price limits on the Shanghai Gold Exchange and that a high level delegation comprising both the US Treasury Secretary and the Chairman of the Federal Reserve will shortly be on its way to China (a very risky strategy if there has been no pre-agreement) added to the
impression that winds of change might have started to blow. Our new bearish view envisages an immediate move. This means that the dollar should waste no time with corrections. As a consequence, the risk limit is set very tight at 116.80. The first support on the way down should be felt at 115.45.

EUR JPY (150.80) The euro remained burdened by a weak dollar-yen yesterday, despite
the brief move higher in the wake of a strong IFO. The risk is for further weakness down to 150.00/10 – the new critical support. Below there, the slide would continue to 148.30/40. This downside perspective is not as great as we previously thought, so a bearish strategy might prove difficult. To the upside, the first supply point is at 151.15.

GBP USD (1.9160) The current objective remains at 1.9225. The upswing ground to a halt yesterday, but there was noticeable correction. This suggests that there were few profits to be taken near the old highs. The risk-limit to our bullish view currently stands at 1.9040/50.

AUD USD (0.7750) The current objective remains at 0.7855. The A$ held firmly to the recent gains during yesterday’s session and should shortly leap to a new year’s high (beyond 0.7790).

IFR Markets

EUR/USD
The pairing stalled just short of the key resistance at 1.2980, the range high in June, but the correction has found support at 1.2940. Daily studies remain bullish, with room to extend and the hourlies are neutral. Our bias is up and our strategy is to buy a 1.2925 dip, or a sustained 1.2980 break, if the hourlies support.

Resistance:
1.3125(M) Daily High Apr 21 Take Profit
1.3095(M) Failure High Apr 22 Buy A Break
1.3070(M) Daily High Apr 25 05 Sell a Failure/Buy Break
1.2980(M) Outside day Hi Jun 5 Stalling Expected

Support:
1.2925(M) Hourly Range Base Nov 23 Buy A Bounce
1.2855(M) 10-Day MA Line Buy A Bounce/Sell Break
1.2800(M) Daily Low Nov 21 Cover On A Bounce
1.2750(M) Daily Lows Nov 8 & 9 Cover On A Bounce

USD/JPY
Shorts established overnight on the break of Fibo support and the 200-day moving average at 116.20/25. Daily studies are bearish, with room to extend before oversold levels are a concern. Intraday studies are at neutral levels. The move stalled ahead of 116.00 and the trade is slightly under water in Asia, but we will hold as the trend looks real.

Resistance:
117.50(M) Nov 15, 17 Lows Sell A Failure
117.30(M) Ichimoku Cloud Base Sell A Failure
117.00(M) Prior Hrly Low Nov 22 Sell A Failure
116.75(M) Hourly Res. Nov 23 Buy Stop 116.80

Support:
116.05(M) Daily Low Sept 22 Cover On A Bounce
115.75(M) 38.2% Of 109.00 - 119.90 Cover On A Bounce
115.55(M) Daily Low Sep 5 Cover On A Bounce
115.20(M) Daily Low Aug 17 Take Profit

GBP/USD
A session of tight ranges yesterday, as the price consolidates below key resistance at 1.9180. Daily studies are bullish, with room to run before overbought levels are a concern. Our bias is up and our favoured strategy is to buy a dip, but we will buy a sustained 1.9180 break if the hourlies support. They are currently at neutral levels.

Resistance:
1.9295(M) Daily High Mar 16 05 Take Profit/Buy Break
1.9215(M) Daily Highs Apr 20 & 21 0 Flat On A Failure
1.9205(M) 1% MA Env Top Flat On A Failure
1.9180(M) Daily High Nov 10 Sell A Failure, Buy Break

Support:
1.9130(M) Hourly Supp. Nov 23 Buy A Bounce
1.9070(M) Prior Hourly High Buy A Bounce
1.9020(M) Hrly Support Nov 22 Buy A Bounce
1.9005(M) Daily Hi Nov 21, 10 M/A Buy A Bounce/Sell Break

USD/CHF
The pairing slipped through Fibo support at 1.2245 overnight, stalling just short of 1.2200, keeping the trend on track. Daily studies are pointing lower and still have room to extend before oversold levels are a concern. 1.2185/00 is a multiple daily low and major support level. We look to reset shorts on a 1.2285 bounce.

Resistance:
1.2450(M) Daily High Nov 20,21 Flat On A Failure
1.2385(M) 10-Day MA Line Sell A Failure/Buy Break
1.2350(M) Daily Low Nov 10 Sell A Failure
1.2285(M) Hourly Range Top Nov 23 Sell A Failure

Support:
1.2185(M) Trend Low Aug 21 Buy A Bounce/Sell Break
1.2140(M) Daily Low Jun 7 Cover On A Bounce
1.2040(M) Pullback Low Jun 6 Take Profit
1.2015(S) Daily Low May 22 Buy A Bounce/Sell Break

EUR/JPY
Shorts established overnight on the break of key support at 150.55, looking for a 100-point fall. The move stalled at 150.30 and the trade is now slightly under water. Daily studies are falling, with plenty of room to run. Initial support comes in at 149.90/95, the low on Nov 6 and 61.8% of the rise from 148.85 to 151.65. We will tighten the stop on a break.

Resistance:
152.65(M) Aug 98 Lo, LT Chnl Top Take Profit, Buy Break
152.00(M) Bollinger Band Top Flat On A Failure
151.65(M) Record High Nov 20 Sell Failure, Buy Break
151.00(M) Hrly Res. Nov 23 Buy Stop 151.05

Support:
150.20(M) Daily Low Nov 7, 8 Cover On A Bounce
149.90(M) Daily Low Nov 6 Cover On A Bounce
149.45(M) Nov 3 Low, TL Fm 147.70 Take Profits, Sell Break
149.25(M) Ichimoku Cloud Top Cover On A Bounce

EUR/GBP
An inside trading day yesterday provided few fesh clues. The primary trend and momentum remain up, but the daily studies are edging lower from overbought levels. Our bias at this point is with the trend and our favoured strategy is to buy a dip towards 0.6745, but we would buy a sustained 0.6785 break, if the hourlies support.

Resistance:
0.6850(M) 61.8% Of 0.6960 - 0.6670 Flat On A Failure
0.6830(M) Daily High Aug 21 Stalling Expected
0.6820(M) High Sept 11, 200 M/A Flat On A Failure
0.6785(M) Daily High Nov 17,20 Sell A Failure/Buy Break

Support:
0.6745(M) Daily Low Nov 21,22 Buy A Bounce/Sell Break
0.6715(M) Nov 8 High, 10,13 Low Cover On A Bounce
0.6695(M) Daily Low Nov 7,8,9 Cover On A Bounce
0.6680(S) Daily Low Nov 2,3,6 Cover On A bounce

EUR/CHF
Key support at 1.5855/60 gave way overnight, but the pairing stalled around 1.5825, the 100 day moving average and rebounded to 1.5850/60. We sold the bounce to 1.5855 in Asia this morning, as the hourlies are close to overbought levels, looking for a test of the September trend low at 1.5755. We will tighten the stop on a 1.5825 break.

Resistance:
1.5975(M) Daily High Nov 20 Take Profit
1.5925(M) 10 & 20 Day M/A Sell A Failure
1.5910(M) Daily Low Nov 13 Sell A Failure/Buy Break
1.5880(M) Hourly Res. Nov 23 Buy Stops Above

Support:
1.5825(M) Daily Low Oct 2 Cover On A Bounce
1.5800(M) Daily Low Sept 28 Cover On A Bounce
1.5755(S) Trend Low Sep 25 Cover On A Bounce
1.5715(M) Daily Low Aug 7, 8 Take Profit

USD/CAD
Our short trade has made progress in the Asian session and is back at our entry level, so we have tightened our stop a notch. The market has all the hallmarks of a trend reversal with Doji tops Nov 20/21, rounding overbought daily studies and strong bearish confirmation on Wednesday. Hourlies are neutral, but we will cover on a 1.1385 failure.

Resistance:
1.1625(M) 38.2% 1.2730 -1.0930 Flat On A Failure
1.1535(M) Weekly Highs Apr 06, 1% Sell Failure, Buy Break
1.1470(M) Daily High Nov 22 Sell A Failure
1.1445(M) Hrly Lows Nov 21 Buy Stops Above

Support:
1.1385(M) Spike Low Nov 22 Stalling Expected
1.1360(M) Uptrend Fm Oct 30 Low Cover On A Bounce
1.1350(M) 61.8% of 1.1260 - 1.1500 Cover On A Bounce
1.1305(M) Daily Low Nov 13 Cover On A Bounce

AUD/USD
0.7770 is proving to be a tough resistance level and the pairing consolidated below overnight and in Asia today. Dailies are moving higher, with room to run and the hourlies are at neutral levels. We remain bullish and look to buy a dip towards 0.7720 or 0.7675-80. Our target on a 0.7770 breakout is the Apr 05 high at 0.7840.

Resistance:
0.7925(M) Daily High Mar 22 05 Take Profit
0.7840(M) Daily High Apr 29 05 Take Profit/Buy Break
0.7795(M) Trend High May 11 Flat On A Failure
0.7770(S) Daily High Nov 1, 1% Buy Sustained Breakout

Support:
0.7720(M) Prior Hrly Lows, Highs Buy A Bounce
0.7675(M) Daily Low Nov 20 Buy A Bounce
0.7640(M) Daily Low Nov 16 Buy Bounce, Sell Break
0.7615(M) Daily Low Nov 13 Cover On A Bounce