Bank Recommendations 17.11.2006

Deutsche Bank

EUR USD (1.2765) Range-traders could hardly contain their excitement yesterday as the release of softer-than-expected US consumer inflation numbers produced a re-run of the price action that followed Tuesday’s PPI release. The euro bounced on the news and then shed the entire gain – and more – by the end of the session. The renewed slump in volatility indicates that nobody fears an exit from the familiar ranges between now and the year-end.
Despite the still hawkish comments by Messrs Moskow and Poole, even these Fed governors must concede that the inflation outlook, albeit uncomfortable, is more benign than they could have hoped for two quarters ago. The BOE admitted as much in its recent inflation report. Indeed, central banks from Tokyo to Frankfurt are all a little surprised by how low inflation has remained and how quickly it is being cooled. The dis-inflationary forces are a global phenomenon; news of tame inflation in any one of these countries could, therefore, be seen as currency-neutral. It was right not to sell dollars post-PPI.
But the desire to buy them is drawn exclusively from a belief in the persistence of sideways market. Notably, the data on capital inflows and other tepid US economic news were completely ignored. Our downside risk-limit was undercut overnight (apologies) and our current view is neutral. The next reliable support is down at 1.2635.

USD JPY (118.25) Yesterday’s modest climb to a fractional new high for the week did nothing to alter our neutral opinion of the dollar. A little more upside room has been opened – to 118.70 or possibly to 119.20 – but this is too modest to be exploitable within a reasonable risk-reward strategy. Good supports are distant at 117.80 and at 116.90; critical points lie much lower.

EUR JPY (151.15) The current target remains at 153.80. The cross essentially marked
time yesterday, within striking distance of the year’s high. Although a hike in Japanese rates was not expected for November, there was some visible disappointment in the market as the BOJ’s Fukui saw no difference between a hike in December and
one in January. He is right of course. But the impression that the Bank is ready to delay moving until the start of next year, or even later, smacks of ‘second-thoughts’. This what not enough, however, for traders to pay record prices for the cross. Any recent top-pickers are probably still in. The risklimit for our positive orientation remains at 150.30.
As before, however, once the price moves above the 151.50 mark, the limit should be hoisted to 150.90.

GBP USD (1.8880) The current objective remains at 1.9225. Although our recent dip-buying strategy succeeded in finding the bottom (so far) of this week’s range, it has not yet been rewarded with any sizeable recovery. Yesterday’s rebound peaked well ahead of the level where we expected initial supply, 1.9000. This point remains valid for toady. To the downside, the tight risk-limit to the bullish scenario remains at 1.8825.

AUD USD (0.7675) Yesterday’s rally beyond 0.7695 was more than enough to wrap up the A$’s phase of downward correction. We now expect a resumption of the uptrend and target 0.7855. Intermediate resistance for today stands at 0.7740. The risk-limit to the new bullish view is to be set at 0.7645.

IFR Markets

EUR/USD
Price is bouncing again intraday and selling strength is the preferred strategy for now. The daily charts are biased lower still and the decent close below the trendline yesterday is encouraging for the bears. Intraday 1.2825 is interim resistance ahead of 1.2840. On the downside 1.2750 is key.

Resistance:
1.2940(S) Daily High Aug 21 Flat On A Failure
1.2900(S) Daily High Nov 10, 1% Flat On A Failure
1.2870(M) Failure High Nov 14 Buy A Break Above
1.2840(M) Daily High Nov 16 Sell A Failure

Support:
1.2750(M) Daily Lows Nov 7 & 8 Buy A Bounce, Sell Break
1.2735(M) 21 Day M/A Cover On A Bounce
1.2680(M) Daily Low Oct 31 Cover On A Buonce
1.2645(M) Daily High Oct 20 Cover On A Bounce

USD/JPY
Off highs and now looking for a deeper correction towards 117.75 and will use dips as fresh buying opportunities. Daily studies are bullish, with plenty of room to run and the low readings on the ADX suggest that a trending move is close. On the topside above 118.60 eyes 119.35 as a target level.

Resistance:
119.35(M) Daily High Oct 25 Take Profit, Buy Break
119.15(M) 1% MA Band top Flat On A Failure
118.75(M) Daily High Oct 27 Flat On A Failure
118.60(S) Daily High Nov 9 Sell A Failure, Buy Break

Support:
117.75(M) Hourly Low Nov 16 Buy Bounce, Sell Break
117.50(M) Daily Low Nov 15 Cover On A Bounce
117.25(M) Daily Low Nov 14 Cover On A Bounce
116.95(M) Ichimoku Cloud base Cover On A Bounce

GBP/USD
Supported ahead of 1.8840 as hourly studies bounce from oversold levels and risk is for rebounds towards 1.8935 again. Selling into strength is our favored strategy for another run towards the 1.8800 mark. Daily charts are bearish still but close to oversold levels so caution prevails.

Resistance:
1.9155(M) Daily High Nov 13 Flat On A Failure
1.9050(M) 61.8% Of 1.9180 - 1.8840 Flat On A Failure
1.8970(M) Nov 15 High, 38.2% Fibo Sell Failure, Buy Break
1.8935(M) Hourly High Nov 16 Sell A Failure

Support:
1.8840(M) Daily Low Nov 15 Buy A Bounce
1.8800(M) 1% MA Band Base Buy A Bounce
1.8770(M) 61.8% Of 1.8520 - 1.9180 Buy A Bounce, Sell Break
1.8665(S) Daily Lows Oct 18 & 19 Take Profit, Sell Break

USD/CHF
Choppy price action continues but with hourly studies overbought risk is for pullbacks again intraday. The daily charts continue to favor higher levels so we will use dips as fresh buying opportunities. 1.2490 is interim support and close to coming back under pressure with the hourly trendline at 1.2435 seen below.

Resistance:
1.2610(M) 61.8% Of 1.2775 - 1.2350 Flat On A Failure
1.2580(M) Daily High Nov 6 Take Profit, Buy Break
1.2545(M) 200-day MA Flat On A Failure
1.2525(M) Daily High Nov 8 Sell Failure, Buy Break

Support:
1.2435(M) Hrly T/line (1.2350), 50% Buy A Bounce
1.2360(M) 1% MA Env Base, BB Buy A Bounce, Sell Break
1.2345(M) 50% Of 1.1920 - 1.2775 Cover On A Bounce
1.2290(M) Range Low, Dly Low Sept 25 Cover On A Bounce

EUR/JPY
Choppy price action continues. The underlying trend remains bullish but the cross is struggling to break 151.50. Intraday the pair is bouncing and we will look to sell upticks with stop and reverse recommendations above the aforementioned 151.50 level. On the downside target 150.50 and monitor reaction to here.

Resistance:
152.65(M) Aug 98 Lo, LT Chnl Top Take Profit, Buy Break
152.45(M) 1% M/A Band Flat On A Failure
151.75(M) Bollinger Band Top Sell Failure, Buy Break
151.50(M) Hourly High Nov 16 Expect Stalling

Support:
151.10(M) Hourly Lows Nov 15, 16 Expect Stalling
150.50(M) 38.2% Of 148.85 - 151.50 Buy Bounce, Sell Break
150.20(M) Daily Low Nov 7, 8 Cover On A Bounce
149.90(M) Daily Low Nov 6, 61.8% Take Profits, Sell Break

EUR/GBP
Prices rallied to and were rejected by the 1% MA env top overnight, then at 0.6797. Pullback are contained by the hourly uptrend line, now at 0.6765 and we expect these barriers to continue to contain price action today. At a push still favor buying dips but will flat fails as daily charts suggest a potential top.

Resistance:
0.6850(M) 61.8% Of 0.6960 - 0.6670 Flat On A Failure
0.6830(M) Aug 21 Hi, 200-d MA Sell Failure, Buy Break
0.6820(M) Failure High Sept 11 Sell A Failure
0.6795(M) Sep 29, Nov 15 Highs, 1% Sell A Failure

Support:
0.6765(M) TL Fm Nov 9 Low Buy A Bounce
0.6750(M) Daily High Nov 13 Buy Bounce, Sell Break
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
Overbought bearish divergence on the dailies, combined with the fact that they are edging lower suggests that we may have formed a short-term top at 1.6000 and a deeper correction is due. Intraday 1.5985 was tested and held and we have opted to sell the failure here. Target os 1.5860 but will cover bounces ahead. Stop/reverse above 1.6000.

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 Flat On A Failure
1.6000(M) Daily High Nov 15 Stop & Reverse Above

Support:
1.5970(M) Hourly Support Nov 17 Expect Stalling
1.5930(M) Daily Low Nov 14,15 Cover On A Bounce
1.5910(M) Daily Low Nov 13 Cover On A Bounce
1.5860(M) Oct 19, 31 Lows Take Profit, Sell Break

USD/CAD
The breakout beyond the Oct peak at 1.1420 failed to extend and 1.1430/35 is now the top on the last three sessions. Daily studies remain net positive, though the RSI has stalled and overbought levels are close. Hourly studies are also at overbought levels, so we sold the failure at 1.1430/35 looking for 1.1350

Resistance:
1.1575(M) 2% MA Band Top Take Profit, Buy Break
1.1535(M) Weekly Highs Apr 06 Take Profit, Buy Break
1.1460(M) Trend High Jul 24, 1% Sell Failure, Buy Break
1.1435(M) Hourly High Nov 15 Sell A Failure

Support:
1.1350(M) 10-Day M/A Take Profit, Sell Break
1.1305(M) Daily Low Nov 13 Cover On A Bounce
1.1260(M) Daily Lows Nov 7 & 10 Take Profit, Sell Break
1.1175(M) Daily Low Oct 27,30 Take Profit, Sell Break

AUD/USD
Double rejection on the hourly charts at 0.768- and price is easing lower again in line with bearish signals from trend indicators. The daily charts are mostly flat but will stick with our recent bull bias for now. Buying dips is our favored strategy for another run at 0.7700.

Resistance:
0.7795(M) Trend High May 11 Flat On A Failure
0.7770(S) Daily High Nov 1 Take Profit, Buy Break
0.7700(M) Hi Nov 10,16 50% Fibo Sell A Failure, Buy Break
0.7680(M) Dble Hrly High Nov 17 Expect Stalling

Support:
0.7630(M) Daily Low Nov 15 Buy Bounce, Sell Break
0.7615(M) Daily Low Nov 13 Cover On A Bounce
0.7550(M) 61.8% Of 0.7415 - 0.7770 Take Profit, Sell Break
0.7525(M) Daily Lows Oct 16, 17 Cover On A Bounce