Bank Recommendations 09.11.2006

Deutsche Bank

EUR USD (1.2765) Market commentators were keen to make something out of esterday’s US congressional election results. But what? While most suggested that co -habitation would mean no real change for the next two years, others insisted that the prospect of greater fiscal scrutiny and a reduction in geopolitical risk would benefit the dollar. We half-suspect that some of the dollar-positive views that circulated yesterday morning had much to do with the euro’s latest climb beyond $1.28. Remember that range-traders are still the dominant group in the market (they are the only one’s who have survived the last few months). After having seen the singlecurrency peak there on the previous day, there was probably no shortage of range-betters willing to gamble that it would do so again. The resignation of Donald Rumsfeld is the most obvious outcome of the mid-term elections. Something is therefore set to change in Iraq. But, so far, nobody knows what the new strategy will be, nor do they know what outcome it will secure. However, from a situation of steady deterioration, can a sudden improvement of affairs really be considered more probable than rapid worsening? Wednesday’s oscillations did nothing to change our current strategy, which continues to target 1.2850. As before, gains beyond this hurdle would extend to 1.2975, the upper end of the euro’s broad range. The risk-limit to the bullish view is unchanged at 1.2700.

USD JPY (117.80) The current target remains 119.90. The USD ticked up over the last 24-hours but stalled at 118.00, yesterday as well as this morning. Admittedly, there are perhaps too few short-term bears to be squeezed at the moment: the price is too low for range traders and early swipes at China by newly-elected House Democrats is probably not yet enough to get too many shorts involved. We still therefore note initial overhead supply at 118.90. To the downside, we prefer to tighten the risk-limit to the bullish scenario to 117.40. The demand situation has become patchier and, below this initial point, no other good support is visible ahead of 116.10.

EUR JPY (150.45) The euro simply flat-lined yesterday but the outlook remains broadly positive. We continue to look for a further modest climb to 151.10 (if not to 151.60). Supports remain at 149.75 and at 148.70/80.

GBP USD (1.9040) The current objective remains 1.9350. A rate hike by the BOE is seen as a ‘done deal’ by market participants, even though Mervyn King might disagree. However, Sterling interest rate bulls may already have taken advantage of the Pound’s recent return to the year’s high to unload longs. Therefore, one should not expect too much ‘selling the fact’ following a hike announcement. This also means that, although Cable might still run into some offers in the 1.9125/35 zone, supply there could be close to exhaustion. The most reliable nearby resistance is likely to be at 1.9180. To the downside, the risklimit to the bullish view remains at 1.8990.

AUD USD (0.7665) The A$ has continued its downward correction overnight, filling generously the room down to the level that we suggested in our last report and opening the door to further near-term softness to 0.7645. Despite this, we are not pessimistic on the A$. From these lower levels we expect it to be able to recover once again. In case of an immediate rebound beyond 0.7755, it would also be considered as bullish. Intermediate resistance stands at 0.7730.

IFR Markets

EUR/USD
Another breach of the long trem trendline which comes in around 1.2790 but we are now looking to see if decent follow though follows. This is not normally the case historically with this trendline. 1.2800 has capped so far abnd need to see a push above here before considering flatting failures for a profit. Stops below 1.2750.

Resistance:
1.2980(M) 2% MA Band Top Flat On A Failure
1.2940(S) Daily High Aug 21 Take Profits, Buy Break
1.2880(M) 1% MA Band Top Flat On A Failure
1.2830(M) Daily High Sept 22 Flat On A Failure

Support:
1.2750(M) Hrly Lows Nov 7, 50% R Sell Stops Below
1.2735(M) 61.8% Of 1.2685 - 1.2820 Buy A Bounce
1.2680(M) Daily Low Oct 31 Sell Sustained Break
1.2645(M) Daily High Oct 20 Cover On A Bounce

USD/JPY
Long trade taken with today"s rally beyond 118.50, the Nov 6 high and 61.8% of 119.70/116.60. Daily studies are trying to come to a bullish consensus again. Hourlies are bullish but closer to o/b so we are using a generous stop below the repeated hourly lows from yesterday and today at 117.70. Initial support is at 118.00. Target is the trend high at 119.90.

Resistance:
119.70(M) Daily High Oct 24 Take Profit, Buy Break
119.35(M) Daily High Oct 25 Flat On A Failure
118.75(M) Daily High Oct 27 Flat On A Failure
118.50(M) Nov 6 Hi, 61.8% Fibo Sell Failure, Buy Break

Support:
117.70(M) Hourly Lows Nov 8, 9 Buy Bounce, Sell Break
117.25(M) Prior Rsst, Hrly Lo Nov 7 Cover On A Bounce
117.00(M) Daily Low Nov 3 Cover On A Bounce
116.60(M) Pullback Lows Nov 1 Take Profit, Sell Break

GBP/USD
Price has broken below the daily trendline which comes in at 1.8985 and we have been forced short. The daily charts are overbought and showing signs of rolling over which leaves risk for further weakness. Hourly studies are still bearish and there remains scope for another push lower.

Resistance:
1.9295(M) Daily High Mar 16 05 Flat On A Failure
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(S) Daily High Aug 8 Sell Failure, Buy Break

Support:
1.8950(S) Daily Low Nov 6 Cover On A Bounce
1.8870(M) Daily Low Oct 27 Cover On A Bounce
1.8850(M) 1% MA Band Base Cover On A Bounce
1.8665(S) Daily Lows Oct 18 & 19 Take Profit, Sell Break

USD/CHF
We have covered the initial bounce out of 1.2480 for a profit as hourly studies threaten to bounce from oversold levels but price has now pushed back below this level. The daily charts are ticking higher however and further corrective action is favored here. Aggressive players can try longs with tight stops. 1.2580/85 is key going higher.

Resistance:
1.2630(M) 61.8% Of 1.2775 - 1.2405 Flat On A Failure
1.2615(M) 1% MA Band Top Flat On A Failure
1.2585(M) Dntrend Line Fm Oct 13 Buy A Break Above
1.2525(M) Nov 8 High, 61.8% R Sell A Failure

Support:
1.2440(M) Daily Low Nov 7 Sell A Break Below
1.2405(M) Daily Low Nov 1 Cover On A Bounce
1.2400(S) Uptrend Fm 1.1920 Take Profit, Sell Break
1.2290(M) Range Low, Dly Low Sept 25 Cover On A Bounce

EUR/JPY
Long triggered o/n by the rally past the prior double top formation at 150.75. We have adjusted the stop to below 150.00 from at it since big figures like that tend to attract price action and defenses. The target has been adjusted to 152.65, with the ascending 2-yr channel top now at 60 and on track to coincide with the Aug 1998 low at 152.65 tomorrow.

Resistance:
162.40(M) Synthetic Yearly High 98
153.00(M) 2% MA Band Top Flat On A Failure
152.65(M) Aug 98 Low, LT Chnl Top Take Profit, Buy Break
151.55(M) 1% MA Band Top Flat On A Failure

Support:
150.65(M) Hourly Support Nov 9 Buy A Bounce
150.20(M) Nov 7, 8 Lows Sell Stops Below
149.90(M) Daily Low Nov 6 Buy A Bounce
149.45(M) Daily Low Nov 3 Buy A Bounce

EUR/GBP
Yesterday"s short remains in play although the cross has bounced and 0.6710 has been breached intraday. Daily studies are mixed at neutral levels. We will stay with the primary down trend, as risk reward is good at current levels. Stop is above the Oct 26 high at 0.6725 and the target is the long-term historical support at 0.6610.

Resistance:
0.6820(M) Failure High Sept 11 Take Profit, Buy Break
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 Stop/Reverse Above

Support:
0.6695(M) Hourly Low Nov 7 Expect Stalling
0.6680(S) Daily Low Nov 2, 3, 6 Lower Stops On A Break
0.6670(M) Oct 31 Trend Low Cover On A Bounce
0.6630(M) 1% MA Band Base Cover On A Bounce

EUR/CHF
Price consolidates below the 1.5990 top but another run at this level is underway as the cross rallies again in line with bullish hrly studies. The daily charts are mixed and suggest that 1.5990 could be a potential top on the cahrts. With this in mind will look to cut the trade on future failures for a profit if given the chance.

Resistance:
1.6160(S) January 2000 High Take Profit, Buy Break
1.6135(M) March 2000 High Flat On A Failure
1.6075(S) Channel Top Take Profit, Buy Break
1.5990(M) Daily High Nov 7 Flat On A Failure

Support:
1.5940(M) Nov 7, 8 Lows, 38.2% Fibo Sell Stops Below
1.5860(M) Oct 19, 31 Lows Sell A Break Below
1.5845(M) 61.8% Of 1.5755 - 1.5990 Cover On A Bounce
1.5825(M) Daily Low Oct 2 Cover On A Bounce

USD/CAD
Low daily ADX and Bolli band spreads a reflection of trend less price action of late and a possible precursor to a new trend worth trading. Mediocre daily buy signals are in the majority on the dailies, so dip buying is a modest favorite. 10-day MA at 1.1285 caught prices at their low today. 1.1260-65 better support, 1.1375 swing high rsst

Resistance:

1.1535(M) Weekly Highs Apr 06 Flat On A Failure
1.1460(M) Jul 24 Peak, 1-yr TL Flat On A Failure
1.1420(M) Trend High Oct 17 Take Profit, Buy Break
1.1375(M) Oct 19 Hi, Nov 2 High Sell Failure, Buy Break

Support:
1.1285(M) Hrly Lo Nov 9, 10-d MA Buy A Bounce
1.1260(M) Daily Low Nov 7 Buy A Bounce
1.1175(M) Daily Low Oct 30, 61.8% Buy A Bounce, Sell Break
1.1145(S) Daily Low Oct 2, 3 Cover On A Bounce

AUD/USD
Short trade taken earlier today on the break below recent daily lows and the reversal-on-close pivot point at 0.7670, but oversold hour lies are supporting prices out of the gate. Daily studies are already rolled over to sells or on the verge of doing so. Stop is above several recent hrly highs and lows and a 61.8% retrace at 0.7720, which should allow hrlies to reset.

Resistance:
0.7795(M) Trend High May 11 Flat On A Failure
0.7770(S) Daily High Nov 1 Sell A Failure, Buy Break
0.7720(M) Hrly Lo/Hi, 61.8% Fibo Buy Stop Above
0.7685(M) Failure High Nov 9 Expect Stalling

Support:
0.7635(M) 38.2% of 0.7415 - 0.7770 Cover On A Bounce
0.7560(S) Oct 17 Hi, Oct 24 Low Take Profit, Sell Break
0.7525(M) Daily Lows Oct 16, 17 Cover On A Bounce
0.7490(M) Dly Low Oct 13, 61.8% Cover On A Bounce