Bank Recommendations 23.11.2006

Deutsche Bank

EUR USD (1.2935) Thursday saw the continuation of the short squeeze that began on mid-session on Wednesday. Those whose positions were rudely overturned might choose to blame the higher than expected US jobless claims number or the disappointing Uni- Michigan survey, but much of the damage to their positions was done even before these figures were published. In any case, these were the same traders who had leapt on recent weak US economic data to build dollar long-positions in the first place. The combination of hasty short-covering and failing liquidity ahead of the US Thanksgiving holiday resulted in one of the biggest one-day advances in months and lifted the single-currency to its highest level since early-June. So far, the squeeze has probably been limited to the hordes of short-term range-traders who had recently been betting on the maintenance of the $1.25 - $1.29 range. Many of these should now be out. There has been no evidence that investors with a broader horizon have been hit. However, any breach of 1.2975 would indicate that the rally is claiming victims who have been in for much longer. The upside objective would then be 1.3290. We would also take a chance on any early dip to 1.2895 to try a bullish strategy in anticipation of such an outcome. The risk-limit in this case would be set very close at 1.2860.

USD JPY (116.50) Carry-traders almost certainly had reason to revisit their positions yesterday. Despite the BOJ’s downgrade for the Japanese economy, which dampened interest rate expectations but was probably priced in already, the yen still pushed the dollar to a 116.35 low. This level just corresponded to our critical support (116.40), which suggests that large-scale unwinding has not yet taken place. The rebound in volatility has already raised the bar for the carry trade. So, below this pivot, we must reckon with a hefty sell-off to 113.50. In the meantime, near-term rebounds will probably be limited to 117.50/55.

EUR JPY (150.75) The cross was dragged down by the more swiftly falling dollar-yen yesterday. Comments by Jean-Claude Juncker, the chief of the Euro group, who described the cross’s rise as ‘too rough’ was also the kind of verbal intervention that top-pickers had been looking for. But as they were short already, the euros downside was rather limited. The risk-limit to our bullish scenario was violated yesterday (apologies), but the critical support is down at 149.50. Below, there we would reckon with a 200- pip slide. To the upside, the new supply points at 151.30 and at 151.80.

GBP USD (1.9140) The current objective remains at 1.9225. Yesterday’s surge higher was unaffected by the BOE minutes that showed that the decision to hike rates was not as one-sided as the market had thought. However, those that were buying Cable yesterday were doing so because they had to. The risk-limit to the bullish view should now be briskly tightened to 1.9040/50.

AUD USD (0.7740) The current objective remains at 0.7855. The A$ regained the early- November peaks during yesterday’s session. Although it got stuck there, we consider the next good resistance to be only at 0.7785. The risk-limit to the bullish view should again be tightened now to 0.7710.

IFR Markets

EUR/USD
A contra-trend short play taken as price stalls at the 1.2975 level. the trade is high risk and as such we have a tight protective stop just above 1.30. The bigger picture still argues for a 1.30 break but only after a bout of corrective consolidation or a modest pullback. We have set a tight objective at the session range base at 1.2925.

Resistance:
1.3125(M) Daily High Apr 21 Take Profit
1.3095(M) Failure High Apr 22 Buy A Break
1.3070(M) Daily High Apr 25 05 Sell a Failure/Buy Break
1.2980(M) Outside day Hi Jun 5 Stalling Expected

Support:
1.2925(M) Hourly Range Base Nov 23 Take Profit
1.2855(M) Hrly Support Nov 22 Buy A Bounce
1.2845(M) 10-Day MA Line Buy A Bounce/Sell Break
1.2800(M) Hrly High Nov 17, Low 21 Cover On A Bounce

USD/JPY
The bear push continues and a drop under the 200-day moving average is on. We will monitor intraday studies should the line break and take the page short. A little loath to sell at the bottom but the daily bear-trend is looking strong and a drop to 115.60 is on the cards.

Resistance:
117.75(M) Nov 20, 21 Lows Sell A Failure
117.50(M) Nov 15, 17 Lows Sell A Failure
117.30(M) Ichimoku Cloud Base Sell A Failure
117.00(M) Prior Hrly Low Nov 22 Sell A Failure

Support:
116.20(S) 200-Day M/A, 61.8% R Sell Sustained Break
116.05(M) Daily Low Sept 22 Cover On A Bounce
115.75(M) 38.2% Of 109.00 - 119.90 Cover On A Bounce
115.55(M) Daily Low Sep 5 Cover On A Bounce

GBP/USD
The surge overnight stalled just short of key resistances in the 1.9180-95 area. An hourly pullback looks overdue, but we do not want to get too greedy looking for a discount given the impressive upswing on the daily charts and studies. Hourly supports are now grouped at 1.9070 and 1.9020. Buy sustained 1.9185 breakout.

Resistance:
1.9295(M) Daily High Mar 16 05 Take Profit/Buy Break
1.9215(M) Daily Highs Apr 20 & 21 0 Flat On A Failure
1.9195(M) 1% MA Env Top Flat On A Failure
1.9180(M) Daily High Nov 10 Sell A Failure, Buy Break

Support:
1.9070(M) Prior Hourly High Buy A Bounce
1.9020(M) Hrly Support Nov 22 Buy A Bounce
1.9005(M) Daily Hi Nov 21, 10 M/A Buy A Bounce
1.8930(M) Daily Low Nov 20 Cover On A Bounce

USD/CHF
Tight price action both frustrating our short play and also saving it from corrective bounces. However, the drop to 1.2230 and small bounce has seen modest profits booked. The 1.2230 support point remains valid and we will monitor price action on a break with a view to taking the page short again. The hourly range top at 1.2285 is also a sell trigger.

Resistance:
1.2450(M) Daily High Nov 20,21 Flat On A Failure
1.2405(M) 10-Day MA Line Sell A Failure/Buy Break
1.2385(M) Hrly Resistance Nov 22. Sell A Failure
1.2285(M) Hourly Range Top Nov 23 Sell A Failure

Support:
1.2230(S) Daily Low Aug 31 Stalling Expected
1.2185(M) Trend Low Aug 21 Buy A Bounce/Sell Break
1.2140(M) Daily Low Jun 7 Cover On A Bounce
1.2040(M) Pullback Low Jun 6 Take Profit

EUR/JPY
The pairing dipped overnight, but stalled just short of the recent range low, the 20-day MA and the 38.2% fibo in the 150.55-60 area before rebounding back around 151.00. Overbought dailies have rolled over, with plenty of room to run. Our bias is lower and our strategy is to sell a topside failure or a 150.55 break, if the hourlies support.

Resistance:
152.70(M) 1% M/A Band Expect Stalling
152.65(M) Aug 98 Lo, LT Chnl Top Take Profit, Buy Break
152.05(M) Bollinger Band Top Flat On A Failure
151.65(M) Record High Nov 20 Sell Failure, Buy Break

Support:
150.55(M) Daily Low Nov 14, 20 M/A Buy 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
149.45(M) Nov 3 Low, TL Fm 147.70 Take Profits, Sell Break

EUR/GBP
Double-day lows near 0.6745 in the last two sessions and the subsequent rebound in prices to 0.6770 resistance sees our 0.6748 short play squared. Daily action has altered the chart significantly and bull plays are back on. Would still like to see a break above 0.6785 before going with the tide and would also see a buy trigger at 0.6750.

Resistance:
0.6850(M) 61.8% Of 0.6960 - 0.6670 Flat On A Failure
0.6830(M) Daily High Aug 21 Stalling Expected
0.6820(M) High Sept 11, 200 M/A Flat On A Failure
0.6785(M) Daily High Nov 17,20 Sell A Failure/Buy Break

Support:
0.6750(M) Hourly Lows Nov 23 Buy A Bounce/Sell Break
0.6715(M) Nov 8 High, 10,13 Low 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
We have just edged our sell trigger lower by 5-pips as the market bounces back to 1.5865. Still respect the underlying bear push but some form of correcrtion is needed to give daily indicators a healthier look. Any such corrective bounces will see shorts taken with 1.5910 failures. Flat for now but looking lower.

Resistance:
1.6010(M) Daily High Nov 17 Sell A Failure, Buy Break
1.5975(M) Daily High Nov 20 Sell A Failure
1.5935(M) 10-Day MA Line Sell A Failure
1.5910(M) Daily Low Nov 13 Sell A Failure

Support:
1.5855(M) Hourly Lows Nov 23 Buy A Bounce, Sell Break
1.5825(M) Daily Low Oct 2 Cover On A Bounce
1.5800(M) Daily Low Sept 28 Take Profit
1.5755(S) Trend Low Sep 25 Buy A Bounce/Sell A Break

USD/CAD
A little uncomfortable with our current short trade. The market has all the hallmarks of a trend reversal with Doji tops Nov 20/21 and strong bearish confirmation last session. However, the market closed significantly off its lows and starts this session on a firmer footing. Corrective action possibly but we are short almost at the lows.

Support:
1.1535(M) Weekly Highs Apr 06 Sell Failure, Buy Break
1.1525(M) 1% MA Env Top Sell A Failure
1.1470(M) Daily High Nov 22 Buy Stop Above
1.1445(M) Hrly Lows Nov 21 Sell A Failure

Support:
1.1385(M) Spike Low Nov 22 Stalling Expected
1.1350(M) 61.8% of 1.1260 - 1.1500 Cover On A Bounce
1.1340(M) Uptrend Fm Oct 30 Low Cover On A Bounce
1.1305(M) Daily Low Nov 13 Cover On A Bounce

AUD/USD
The pairing continued to edge higher overnight, stalling just short of 0.7770 and we booked a profit on intraday longs. Dailies are moving higher, with room to run and the hourlies are now neutral. We remain bullish and look to buy a dip towards 0.7720 or 0.7675-80. Our target on a 0.7770 breakout is the Apr 05 high at 0.7840.

Resistance:
0.7925(M) Daily High Mar 22 05 Take Profit
0.7840(M) Daily High Apr 29 05 Take Profit/Buy Break
0.7795(M) Trend High May 11 Flat On A Failure
0.7770(S) Daily High Nov 1, Bolli Buy Sustained Breakout

Support:
0.7720(M) Prior Hrly Lows, Highs Buy A Bounce
0.7675(M) Daily Low Nov 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