Bank Recommendations 03.11.2006

Deutsche Bank

EUR USD (1.2775) Upbeat Euro zone PMI, below expectation German unemployment and growth in US wage costs while productivity stalled in Q3, provided those who wanted to buy the Euro yesterday with enough reason to do so. Despite the bout of positive news it could still not crack the $1.28 level. However, the attention-grabber was really Trichet. Even before he sat down at the press conference, the major markets had already started to move lower. It was not question of ‘selling the fact’. No change in rates was expected, as was his hawkishness and his ‘strong vigilance’. Traders simply expected him to be the catalyst for a correction, be it in the euro, binds or stocks. But this was not to be. The ECB chief was even described as tedious for not letting the cat out of the bag on interest rates in 2007. On the US side, the Fed’s Fisher hinted that inflation had peaked. It seems as if the only difference between the Fed and the ECB is that the Fed is avoiding commitment while the ECB looks committed to rate hikes – almost with the precision of a Swiss watch. Despite the still positive outlook for the single-currency, we are still cannot enter into a strategy because of the unfavourable risk-reward situation. However, the bullish potential up to 1.2865 remains. Any weakness will find support at 1.2660.

USD JPY (117.05) Comments by the Japanese finance ministry official, Watanabe, were
enough to nudge some traders into profit-taking. He said that there was no reason for the yen to weaken against the backdrop of the recovering economy – this is stale news, but it seems to have been sufficient to cause a burst of panic. Later on, some traders dubiously ascribed the recovery of the dollar in the afternoon to Asian central bank buying. We were anyway expecting good demand at lower levels, but 116.25, our favoured level, was not seen. We would still embark on a bullish strategy there. In this case, 115.90 would not only mark the risk-limit, but also the point for a stopand-reverse strategy. Aernatively 118.20 could also serve as the bullish trigger.

EUR JPY (149.55) The cross was also punished to a two week low by the Watanabe
comments, but turned around again to make the day’s high. Sadly, the dip missed our
recommended buy-level by just one-tick. A bullish strategy at the current level would offer a very poor risk-reward profile and a return to yesterday’s low would now be a weak sign. Thus we simply propose upside room to 150.10 and then to 151.00.
Supports are visible at 148.75 (weak) and at 148.25.

GBP USD (1.9080) Talk about a $15bn Russian interest in Vodafone accompanied
Sterling’s upside march yesterday. But the news was not enough to get traders to buy at a new year-high. As before, a move beyond 1.9175 would trigger gains in the order of 300-pips. On a pullback, one can expect to run into buying interest at 1.8950/65 (critical).

AUD USD (0.7745) The AUD managed to recover again after the initial dip. The next target remains at 0.7825/35. Any further gains will run into a hurdle at 0.7780. The risk-limit for today stands at 0.7690.

IFR Markets

EUR/USD
Failed at 1.2785 yesterday just shy of Wednesday’s 1.2795 high and a top looks to be forming on the daily charts. Trend indicators are overbought and the RSI is showing signs of rolling over from overbought levels. Intraday price is easing as well, 1.2680 is key on the downside.

Resistance:
1.3070(M) Daily High Apr 25 05
1.2940(S) Daily High Aug 21, 2% MA Take Profits, Buy Break
1.2830(M) 1% MA, High Sept 22 Sell Failure, Buy Break
1.2795(M) Daily High Nov 1 Sell A Failure

Support:
1.2740(M) Hourly Low Nov 2 Buy A Bounce
1.2680(M) Oct 31 Low, 38.2%, 10-D Sell A Break Below
1.2605(M) 61.8% Of 1.2485 - 1.2795 Cover On A Bounce
1.2525(M) Daily Low Oct 24 Cover On A Bounce

USD/JPY
Another failure to close inside the Ichimoku cloud yesterday leaves us favoring the topside again. Daily trend indicators are oversold as well and we are looking for rebounds here. Prefer to be buyers on dips intraday and looking for a push through the 118.05 level on the topside to increase confidence in the bulls.

Resistance:
119.35(M) Hourly Stalls Oct 25 Flat On A Failure
118.30(M) Hourly Lows Oct 26 Flat On A Failure
118.05(M) Oct 19 Low, 31 High Sell Failure, Buy Break
117.40(M) Failure High Nov 2 Expect Stalling

Support:
116.60(M) Pullback Lows Nov 1 Expect Stalling
116.25(M) 200-Day MA, 61.8% Fibo Buy A Bounce
116.15(M) Ichimoku Cloud Base Buy Bounce, Sell Break
116.05(M) Daily Low Sept 22 Cover On A Bounce

GBP/USD
A Doji signal yesterday follows the previous day"s shooting star pattern and a lower open this morning is encouraging for further bearish action. Yesterday price was unable to sustain a break of 1.9100 and has mpstly consolidated overnight. Now pushing lower and has taken out 1.9060 support with scope for a 1.9035 retest seen.

Resistance:
1.9215(M) Daily Highs Apr 20 & 21 05 Take Profit, Buy Break
1.9160(S) Daily High Apr 29 05 Flat On A Failure
1.9145(M) Daily High Aug 8, 10-Da Buy A Break Above
1.9105(M) Daily High Nov 2 Buy Stop Above

Support:
1.9035(M) Hourly Low Nov 2 Cover On A Bounce
1.8960(M) Daily Low Oct 31 Cover On A Bounce
1.8945(M) 10-Day MA Take Profit, Sell Break
1.8870(M) Daily Low Oct 27 Cover On A Bounce

USD/CHF
Market gave quite a strong technical signal by basing out around a key fibo retracement level and staying above the major trend line support. Based on this longs are in play with a very tight stop below yesterday"s low. Daily stochastic studies are threatening to bounce from oversold levels in favour of the trade.

Resistance:
1.2645(S) Dntrend Line Fm Oct 13 Take Profit, Buy Break
1.2570(M) High Oct 27, 200-Day MA Flat On A Failure
1.2530(M) Oct 31 Hi, 10-D MA Take Profit, Buy Break
1.2480(M) Hourly High Nov 2 Flat On A Failure

Support:
1.2435(M) Daily Low Nov 2 Sell Stop Below
1.2405(M) 61.8% Of 1.2190 - 1.2775 Buy Bounce, Sell Break
1.2385(S) Uptrend Fm May 15 Low Cover On A Bounce
1.2290(M) Range Low, Dly Low Sept 25 Cover On A Bounce

EUR/JPY
Shorts are in play from overnight and the pair is easing lower in line with bearishly ticking hourly studies. Oversold levels are close though so be cautious of rebounds. Daily charts are ticking lower still and 148.90 is a viable target now that 149.50 is yielding. Below 148.90 opens the way for 148.30.

Resistance:
150.75(M) Fail High Aug 31 & Oct 27 Flat On A Failure
150.40(M) Bollinger Band top Buy A Break Above
150.15(M) Hourly Lows Oct 26 Buy Stops Above
149.80(M) Daily High Oct 31, 50% R Sell Failure, Buy Break

Support:
149.50(M) Hourly Support Nov 3 Expect Stalling
148.90(M) Lower Bolli Band Take Profit, Sell Break
148.50(M) Daily Low Oct 17 & 18 Cover On A Bounce
148.30(M) Low Sep 27, Ichimoku Base Cover On A Bounce

EUR/GBP
The stop on our short trade is very close by, sitting just above a slew of hourly highs around .6700. Longer term charts and signals are bearish but this would be reversed if the market can manage to break and close the week above .6725. Hourlies are currently nearing overbought levels so we may live to fight another day.

Resistance:
0.6795(M) Daily High Sept 29 Flat On A Failure
0.6770(M) Daily High Oct 6 Flat On A Failure
0.6725(M) Daily High Oct 26 Sell Failure, Buy Break
0.6700(M) High Oct 30,31 Nov1 Buy Stop Above

Support:
0.6670(M) Oct 31 low, Chnl Btm Cover On A Bounce
0.6640(M) 1% MA Band Base Cover On A Bounce
0.6610(M) Trend Low Jun 10 05 Take Profit, Sell Break
0.6575(S) Daily Low Aug 2 04, 2% Cover On a Bounce

EUR/CHF
Short trade taken overnight on the back of overbought hourly studies is not making any headway. We will stay with it for now and see how the market develops. Further oscillation between 1.5860 and 1.5970 is quite likely and long term trading decisions should only be taken at the extremes, or on the break of this range. Dailies mildly bullish.

Resistance:
1.6160(S) January 2000 High Take Profit, Buy Break
1.6135(M) March 2000 High Flat On A Failure
1.5970(S) 2006 High (Sept 15) Buy Stop/Reverse
1.5940(M) TL 1.597-1.595 Sell A Failure

Support:
1.5860(M) Oct 19, 31 Lows/ 50% Fibo Cover On A Bounce
1.5835(M) 61.8% Of 1.5755 - 1.5970 Cover On A Bounce
1.5825(M) Daily Low Oct 2 Cover On A Bounce
1.5800(M) Daily Low Sept 28 Cover On A Bounce

USD/CAD
We booked profits on our long trade overnight but we are looking to reload on any dip. 1.1305 is the first support level of any significance. Judging by the sharp bounce off important support at 1.1175, this move is expected to test 1.1460 trend highs in coming sessions. Daily stochastic have turned bullish.

Resistance:
1.1535(M) Weekly Highs Apr 06 Flat On A Failure
1.1460(M) Jul 24 Peak, 1-yr TL Take Profit, Buy Break
1.1420(M) Trend High Oct 17, BB Flat On A Failure
1.1375(M) 1% MA Band Top Buy Sustained Break

Support:
1.1305(M) 38.2% of 1.1200/1.1370 Buy A Bounce
1.1280(M) Hourly Low Nov 1 Buy A Bounce
1.1200(M) Daily Low Oct 31 Sell A Break Below
1.1175(M) Daily Low Oct 30, BB Cover On A Bounce

AUD/USD
Daily studies are very overbought and we are nearing important resistance levels between .7795 and .7840. This has us tending towards a sell rally strategy and we will look for opportunities when hourlies are overbought close to resistance levels. Longer term charts are still bullish so buy any deep dips.

Resistance:
0.7925(M) Daily High Mar 22 05 Flat On A Failure
0.7840(M) Daily High Apr 29 05 Flat On A Failure
0.7795(M) Trend High May 11 Sell Failure
0.7770(S) Daily High Nov1 Sell A Failure

Support:
0.7710(M) Hourly Low Nov2 Buy Bounce
0.7685(M) Uptrend Fm Oct 12 Low Buy A Bounce
0.7670(M) Daily Lows Oct 27, 30 Buy Bounce, Sell Break
0.7650(M) Oct 26 High Cover On A Bounce