Bank Recommendations 21.11.2006

Deutsche Bank

EUR USD (1.2815) In the absence of any economic data releases and no fresh rumors of hedge fund losses, the default stance of the vast majority of the current day-traders, i.e. to trade the range, imposed itself on the market. What we considered to be the most likely outcome – for these range-traders to slowly drift back to the market and push the Euro lower again – was precisely the one that unfolded. Even though they were stopped out of bearish positions just on Friday (the second bloody nose in the last two weekends), they have absolutely no interest in doing anything else. As a consequence, the price slipped back to 1.2810 and the volatility slumped back towards the year’s low. The single-currency’s retreat was not enough to make yesterday’s suggested dip-buying strategy feasible. In the meantime, nearby demand has worsened. The best support is fully a big-figure lower at 1.2710. However, this does not mean that we are bearish; as the current preference among the short-term crowd is to be short again, and as some of these positions already exist, there is little reason why a decline should extend that far. On the upside, the best resistance remains at 1.2975, but an early break beyond 1.2865 could already be a sign that someone other than the current protagonists has appeared.

USD JPY (118.05) The dollar was able to recover from Friday’s setback during yesterday’s trading session. Newspaper reports that the Japanese government was on the verge of downgrading its economic assessment no doubt helped. But this step is little more than the rendering official evidence from the last few months of economic releases. Market expectations for the timing of the next BOJ rate hike had already shifted beyond the year-end. We remain neutral. As mentioned in previous reports, some upside room remains open for the dollar – to 118.90 or possibly to 11930 – but this is too modest to be exploitable within a reasonable risk-reward strategy. Good supports are visible only down at 117.00/10 and at 116.35.

EUR JPY (151.40) Our current target remains at 153.80. Our bullish stance was finally
rewarded with a new all-time high for the cross yesterday. But this was no short-squeeze; the uptick to a 151.65 high was quickly met by the now familiar short-term sales. The development, at least, allowed us to tighten the risk-limit to the bullish scenario. It now stands at 150.80. Below this solitary support, the next demand point stands at 149.85. To the upside, the next nearby hurdle intervenes at 152.10.

GBP USD (1.8975) The current objective remains at 1.9225. Robust UK public finances and house prices were favourably received by the market yesterday and the Pound was able to make some upside progress. But it was unable to overtake our first supply point, which today stands at 1.9000/10. We still await a surpass there to trigger an upside acceleration and to permit an aggressive lifting of our risk-limit (to 1.8935). In the meantime, we must satisfy ourselves with a modest tightening to 1.8880.

AUD USD (0.7690) The current objective remains at 0.7855. Intermediate supply is expected at 0.7720 for today. The risk-limit to our bullish can now be lifted to 0.7665.

IFR Markets

EUR/USD
Price is bumping along within a 1.2800 to 1.2840 range and scope for trade is subsequently limited. We are really struggling for anything that resembles a trend. With sideways action following a move up from 1.2480 the previous bull run could demand some respect but foe now we are sidelined.

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

Support:
1.2800(M) Prior Hrly High Nov 17 Buy A Bounce/Sell Break
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
The 117.10/118.60 range continues to dominate, as it has for over two weeks, leaving the daily studies showing mixed signals in neutral territory and the ADX on the lows for the year, which suggests that a trending move is close. 117.50 is shaping up as the initial support and we look to trade the 117.50/118.60 range.

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 Lo Nov 15, TL 116.60 Buy A Bounce, Sell Break
117.10(M) Daily Low Nov 13 Cover On A Bounce
117.00(M) Ichimoku Cloud base Cover On A Bounce
116.60(M) Daily Low Nov 1 Cover On A Bounce

GBP/USD
Not a very convincing bull run and our long play is looking vulnerable. The risk is for a period of sideways action with price pivoting the converged and flat 10 and 21-day averages, currently at 1.8985. Day studies are neutral, trend readings are falling and the candlesticks suggest a degree of indecision. Hold for now but monitor action at 1.8995.

Resistance:
1.9180(M) Daily High Nov 10 Take Profit/Buy Break
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
1.8990(M) 10 & 20-Day MA Line Stalling Expected

Support:
1.8930(M) Hrly Low Nov 20, 38.2% Sell Stops 1.8920
1.8885(M) Hrly Sppt Nov 17 Buy A Bounce
1.8835(M) Pullback Low Nov 17 Buy A Bounce
1.8795(M) 1% MA Band Base Buy A Bounce

USD/CHF
Heavy going for our current short play as price is held above the entry level. The market has been capped at 1.2450, which has kept the trade alive but we need to see a more convincing bear break to set the trade off and running. Last session"s 1.2395 spike low provides both a target and support point with recent lows at 1.2350 the key support.

Resistance:
1.2580(M) Daily High Nov 6 Flat On A Failure
1.2535(M) 200-day MA Sell A Failure/Buy Break
1.2485(M) Prior Hrly Sppt, 61.8% Buy Stop 1.2490
1.2450(M) 10-Day MA Line Stalling Expected

Support:
1.2385(M) Daily Spike Low Nov 14 Stalling Expected
1.2350(M) Trend Low Nov 10 Cover On A bounce
1.2290(M) Range Low, Dly Low Sept 25 Cover On A Bounce
1.2275(M) Daily Low Sept 4,7 Cover On A Bounce

EUR/JPY
Frustrating price action following the long trade taken at 151.50 last session. The market has been unable to hold spikes to 151.67 and 151.56 and is now threatening our sub-151.00 stop. The loss of momentum and indifferent daily studies warns that we may have seen the best and that our trade is living on borrowed time. Consider a stop/reverse.

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

Support:
151.10(M) 10-Day MA Line Sell Stop 150.95
150.55(M) Daily Low Nov 14, 20 M/A Buy A Bounce, Sell Break
150.20(M) Daily Low Nov 7, 8 Cover On A Bounce
149.90(M) Daily Low Nov 6 Cover On A Bounce

EUR/GBP
The pairing seems to have formed a short-term top last week just below 0.6800 and we have lowered our initial sell spots to 0.6765/85, which are Friday"s low and the high on the last two sessions. Prices have tested 0.6750, which is the next key support and our pivot point, but oversold hourlies favour selling strength.

Resistance:
0.6830(M) Daily High Aug 21 Sell Failure, Buy Break
0.6820(M) High Sept 11, 200 M/A Sell A Failure
0.6785(M) Daily High Nov 17,20 Sell A Failure
0.6765(M) Daily Low Nov 17 Sell A Failure

Support:
0.6750(M) Hi Nov 13, 38.2%, 10 M/A 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 pairing dipped overnight, stalling at 1.5920, trend support from the 1.5755 low in September, just short of the Nov 13 low and 38.2% of the 1.5755/1.6010 high at 1.5910/15. Daily and hourly studies show mixed signals in neutral territory. Our strategy is to buy a 1.5910/20 dip, with a tight stop looking for 1.6000.

Resistance:
1.6135(M) March 2000 High Flat On A Failure
1.6080(S) Channel Top Flat On A Failure
1.6010(M) Daily High Nov 17 Sell A Failure, Buy Break
1.5975(M) Hrly Hi Nov 20, 61.8% R Expect Stalling

Support:
1.5920(M) TL Fm 1.5755 Buy A Bounce
1.5910(M) Daily Low Nov 13, 38.2% Buy A Bounce, Sell Break
1.5860(M) Oct 19, 31 Lows Take Profit, Sell Break
1.5855(M) 61.8% Of 1.5755 - 1.6010 Cover On A Bounce

USD/CAD
Another breakout beyond major historical resistance at 1.1460 was thwarted by overbought daily studies overnight, with the 1.1485 high also the 1% MA envelope top. We do not rule out the 1.1535 high from Apr 13 being retested, as the hourlies are back at neutral levels. Initial trend line support comes in at 1.1440.

Resistance:
1.1625(M) 38.2% 1.2730-1.0930 Flat On A Failure
1.1615(M) 2% MA Band Top Flat On A Failure
1.1535(M) Weekly Highs Apr 06 Sell Failure, Buy Break
1.1485(M) Nov 20 High, 1% MA Env Top Expect Stalling

Support:
1.1440(M) Uptrend Fm Nov 10 Low Buy A Bounce
1.1405(M) Nov 14 Hi, Nov 17 Low Buy Bounce, Sell Break
1.1385(M) 10-Day M/A Cover On A Bounce
1.1305(M) Daily Low Nov 13 Cover On A Bounce

AUD/USD
0.7700/10 remains the key resistance and is under pressure. Dailies are bullish, with plenty of room to extend. though from neutral levels. Hourlies are close to overbought levels. We will buy a sustained 0.7710 break, if the hourlies support, or set longs into a dip to 0.7675, keeping the stop tight.

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:
0.7675(M) Hourly Support Sep 20 Buy A bounce
0.7640(M) Daily Low Nov 16 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