Bank Recommendations

Deutsche Bank

EUR USD (1.2940) The start of the new week failed to bring much fresh impetus for the euro and it ended the trading day a tad lower than where it had started it. The economic calendar could also not bring much relief as it was rather on the light side with only the leading indicators, which was delayed by 24-hours, and the Fed’s Yellen on the agenda. Even though she will only vote on the FOMC in 2009, some traders were keen to hear some dovish utterances from her. But with comments from the Fed having been rather hawkish lately it was hard to expect anything different. In the end she merely repeated what she had said before – the strong jobs market poses a threat to inflation. Other news events, for example Iran barring entry to atomic inspoectors, Bush’s new strategy in Iraq, the oil price slide or musings over the future targets of China’s new investment institution simply do not stick in currency markets at the moment. In any case, good news for the dollar has not had the same clout recently, as traders seem to have settled into a big-figure trading range. We remain neutral on the euro for the moment, but would turn bearish shortly ahead (15-pips) of the 1.3065 resistance. The latter would mark the gatekeeper for the new bearish strategy. We would then set the target at 1.2835.

USD JPY (121.70) The market has been full of carry-trade worry over the last couple of days. The main arguments centre on the lower volatility and on the premium for yen call options versus puts. However, as traders appear to be securing their carry-trades in anticipation of a dollar correction, it is just marching higher. We therefore stick to our bullish orientation for target 123.00. In the event of a pullback, our now tightened risk-limit at 120.65 should not be violated. The level 119.55 marks the critical point to the downside.

EUR JPY (157.40) While market participants are pondering about a possible carry-trade bubble, they seem to overlook the other news that is out there. Yesterday one trader even expressed the view that the BoJ will not hike rates before the fiscal year to show ‘consideration’ to some investors. The objective still stands at 161.00. Further strength will have to clear the 158.00/10 hurdle in order to gather any momentum. For the time being, we leave the risk limit to the bullish view at 156.30.

GBP USD (1.9745) Even though the latest house price survey showed an upside surprise and was widely discussed in the media, Sterling benefited only modestly. In addition, traders seem to be focussed on the latest MPC meeting and they believe a 6 to 3 (as opposed to a 7 to 2) vote for a hike would reveal a downside risk for Cable. Our bullish target is pinned at 2.0100. To the downside, the risk-limit should be tightened to 1.9690.

AUD USD (0.7895) The AUD is still in a stable position. We still expect it to strengthen and keep our target at 0.8050. Upside progress will run into resistance at 0.7960. For the moment we opt to keep the risk-limit relatively tight at 0.7860. All price levels mentioned in this report require a 10-pip break to be invalidated

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: "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: "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: "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."