Bank Recommendations 20.11.2006

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
A failure at 1.2845 (1.2846 high) and we took the page short. The market is still threatening higher levels following Friday"s bounce out of 1.2763 but with daily studies struggling to confirm strength and with hourly studies also highlighting a lack of bull side momentum we will give the bearside a run.

Resistance:
1.3045(M) 2% MA Band Top Flat On A Failure
1.2940(S) Daily High Aug 21 Sell A Fail/Buy Break
1.2900(S) Daily High Nov 10 Buy Stop 1.2905
1.2870(M) Failure High Nov 14 Sell A Failure

Support:
1.2800(M) Prior Hrly High Nov 17 Cover On A Bounce
1.2750(M) Daily Lows Nov 7 & 8 Cover On A Bounce
1.2680(M) Daily Low Oct 31 Take Profit/Sell A Break
1.2645(M) Daily High Oct 20 Cover On A Bounce

USD/JPY
Price is pivoting around the 118.00 level having spiked to 118.20 early in the European session. A slight bull bias to both the hourly and daily chart. However, the daily picture also shows price slipping back towards the apex line of a triangle, this despite a break of the top line Friday. An inside day in prospect, limited trade scope.

Resistance:
118.75(M) Daily High Oct 27 Flat On A Failure
118.60(S) Daily High Nov 9 Sell A Failure, Buy Break
118.50(M) Hourly High Nov 17 Sell A Failure
118.35(M) Ichimoku Cloud Top Sell a Failure

Support:
117.50(M) Daily Low Nov 15 Expect Stalling
117.45(M) Uptrend Fm 116.60 Buy Bounce, Sell Break
117.10(M) Daily Low Nov 13 Cover On A Bounce
116.95(M) Ichimoku Cloud base Cover On A Bounce

GBP/USD
A failed attempt overnight to trigger a selloff below Wednesday"s 1.8840 low resulted in a sharp rally back towards the Nov 15 high, 20-day MA and 38.2% Fibo at 1.8970, recording a bullish outside trading day. Dailies are stalled mid-range. Hourlies are overbought. Our strategy is to buy a dip, as they unwind.

Resistance:
1.9180(M) Daily High Nov 10 Flat On A Failrue
1.9155(M) Daily High Nov 13 Flat On A Failure
1.9050(M) 61.8% Of 1.9180 - 1.8835 Flat On A Failure
1.8970(M) Nov 15 High, 38.2% Fibo Sell Failure, Buy Break

Support:
1.8885(M) Hrly Sppt Nov 17 Buy A Bounce
1.8835(M) Pullback Low Nov 17 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

USD/CHF
A volatile session on Friday saw trend line resistance breached on the rise to 1.2540, followed by trend support tested on the dip to 1.2425, to record a bearish outside trading day. Daily studies show mixed signals at neutral levels, while the hourlies are oversold. Our bias is to sell a bounce above 1.2500, as the hourlies unwind.

Resistance:
1.2610(S) 61.8% Of 1.2775 - 1.2350 Flat On A Failure
1.2580(M) Daily High Nov 6 Flat On A Failure
1.2540(M) 200-day MA Sell Failure, Buy Break
1.2485(M) Prior Hrly Sppt, 50% Expect Stalling

Support:
1.2420(M) Hourly Lo Nov 17, 61.8% Buy Bounce, Sell Break
1.2350(M) Trend Low Nov 10 Take Profit
1.2345(M) 50% Of 1.1920 - 1.2775 Buy Bounce, Sell Break
1.2290(M) Range Low, Dly Low Sept 25 Cover On A Bounce

EUR/JPY
The 151.50 break finally came and we have been taken long. Topside levels are few and far between bit we have added a 1 and 2% moving average envelope, which provide targets at 152.55 and 154.05. The daily range break bodes well for bull plays but we now need to see a session close above the 141.45-48 tops to strengthen the break.

Resistance:
154.05(M) 2% MA Band Top Flat On A Failure
152.65(M) Aug 98 Lo, LT Chnl Top Take Profit, Buy Break
152.55(M) 1% M/A Band Flat On A Failure
151.75(M) Bollinger Band Top Flat On A Failure

Support:
151.05(M) 10-Day MA Line Sell Stop 150.95
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
Thursday"s high, just shy of 0.6800 looks like a short-term top, as the overbought daily studies edge lower, with the stochastic showing a fresh bearish cross. Hourly studies are at neutral and our strategy is to set shorts into a 0.6790 bounce. We will sell a 0.6750 break, if the hourlies support.

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:
0.6750(M) Daily High Nov 13, 38.2% Buy A Bounce, Sell Break
0.6715(M) Nov 8 Hi, Nov 10 Lo 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
The overnight spike to 1.6010 stopped intraday shorts, but looks to be a short-term top, re-inforced by daily bearish divergence. Dailies are heading lower, with room to run. Key support is the Nov 13 low and daily uptrend line from the Sep 25 swing low, both around 1.5910. Our strategy is to sell a bounce, as the oversold hourlies unwind.

Resistance:
1.6160(S) January 2000 High Take Profit, Buy Break
1.6135(M) March 2000 High Flat On A Failure
1.6080(S) Channel Top Sell A Failure
1.6010(M) Daily High Nov 17 Sell A Failure, Buy Break

Support:
1.5930(M) Daily Low Nov 14,15 Buy A Bounce
1.5910(M) Nov 13 Low, TL Fm 1.5755 Buy Bounce, Sell Break
1.5860(M) Oct 19, 31 Lows Take Profit, Sell Break
1.5850(M) 61.8% Of 1.5755 - 1.6000 Cover On A Bounce

USD/CAD
Prices rallied beyond 1.1460 historical resistance overnight, stalled at 1.1480 and then found support at 1.1425. The topside is back under pressure in Asia, backed by rising, though overbought daily studies and neutral hourlies. Using 1.1405 as our downside pivot. 1.1535 is next major resistance.

Resistance:
1.1625(M) 38.2% 1.2730-1.0930 Flat On A Failure
1.1600(M) 2% MA Band Top Flat On A Failure
1.1535(M) Weekly Highs Apr 06 Sell Failure, Buy Break
1.1480(M) Hourly High Nov 17 Sell A Failure

Support:
1.1405(M) Nov 14 Hi, Nov 17 Low Buy Bounce, Sell Break
1.1370(M) 10-Day M/A Cover On A Bounce
1.1305(M) Daily Low Nov 13 Cover On A Bounce
1.1260(M) Daily Lows Nov 7 & 10 Take Profit, Sell Break

AUD/USD
The pairing had an inside trading session by a couple of pips on Friday. 0.7700/10 is key resistance and was tested in Asia, being a daily range high and 61.8% retracement of the dip from 0.7770 to 0.7615. Daily studies show mixed signals, but have an upward bias, while the hourlies are close to overbought. Our strategy is to buy a 0.7650 dip.

Resistance:
0.7840(M) Daily High Apr 29 05 Flat On A Failure
0.7795(M) Trend High May 11 Flat On A Failure
0.7770(S) Daily High Nov 1 Take Profit, Buy Break
0.7710(M) Daily Hi Nov 9, 61.8% Fibo Sell A Failure, Buy Break

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