Bank Recommendations 29.11.2006

Deutsche Bank

EUR USD (1.3180) As the euro fought its way to the upside yesterday, the top-pickers moved back in. However, it seems as if many short-term traders do not have the euro, want it, but would like to acquire it at lower levels. This simply means that they themselves could be trying to push it lower. Despite this, the single currency appeared well supported at lower levels, which could have hinted at some long-term buying interest. Nevertheless, the mood in the market remained clearly euro bullish and even more so as it hit the $1.32 level. This also explains why it finally dawned on some traders that they should rather focus on Trichet and Juncker to determine whether euro strength is a problem for the eurozone. In addition, yesterday’s US data releases just further fuelled the bullish train and hammered in the message that the idea of a soft landing for the US economy is unrealistic. Even though the Fed Chair did not mention the idea of a rate cut on Tuesday, and was probably even perceived as hawkish, the belief is out there that the US economy is weakening and weakening rapidly. This explains why Bernanke was labelled as seeing the US economy with ‘deeply tinted rose lenses’, however, there is also the risk that the market could get ahead of itself. Our stance on the single currency remains bullish with the target set at 1.3290 (beyond 1.3595 is in the pipeline). It is well supported and for today the 1.3085 gatekeeper to the downside marks the risk-limit.

USD JPY (115.85) Despite the big correction in the cross, volatility compared to the
has only risen moderately. Also here the dollar was sold off on the back of the US data yesterday, but it still managed to spike up in between to flirt with the risk-limit again. However, it was only after the release of the Japanese industrial output numbers that it was pushed down and put back on the road to our 113.50 target. Any sign of a rebound should not violate our risk-limit at 116.40/45.

EUR JPY (152.90) The euro was on a roll again yesterday as it continued to explore its
upside potential while racking up new highs. This time it reached a 153.45 high. The euro bulls are still out in force and even see ¥160 as possible while they focus on interest rate differentials and the ECB hiking rates straight into 2007. However, we are more modest and opt to remain neutral for risk-reward considerations. Overhead, supply is lurking at 153.10 and after that the next hurdle stands at 153.85/90. On a dip, supports are a distance away at 151.70/75 and 150.80.

GBP USD (1.9520) Cable notched up a fresh high as well and cleared the $1.95 mark. With Gordon Brown’s statement that growth would exceed the government’s expectation and UK house prices having grown at its fastest in 17 months, market participants had enough arguments to support their buying interest. However, the risk-reward outlook only allows us to enter into a bullish strategy on weakness down to 1.9440. Once our positive orientation is triggered, it would be guarded by the 1.9370 risk-limit.

AUD USD (0.7830) The AUD continued its upward march and came within 10 ticks of our 0.7855 target. Beyond this level, Aussie strength could even continue to the lofty 1,8170. On its way up we expect it to fight with the 0.7885/90 supply. The risk-limit to the positive orientation is visible at 0.7805.

IFR Markets

EUR/USD
Easing action has stopped out the long trade as 1.3175 yields and the stops below at 1.3170 are hit. Hourly studies are oversold but show no signs of bouncing as yet. The underlying trend remains higher on the daily charts but studies are overbought and advice is to re establish long positions on dips.

Resistance:
1.3290(M) Mar 16, 05 Low Take Profit, Buy Break
1.3265(M) Weekly Low Mar 14 05 Flat On A Failure
1.3235(M) 2% M/A Envelope Flat On a Failure
1.3215(M) Daily High Nov 29 Buy A Break Above

Support:
1.3110(M) 1% MA Env Top Buy A Bounce
1.3090(M) Daily Low Nov 27 Buy Bounce, Sell Break
1.2980(M) 10-Day MA Line Buy A Bounce
1.2925(M) Daily Low Nov 23 Buy A Bounce, Sell Break

USD/JPY
Short has been stopped out as the price continues to rally and has hit the stop level at 116.10. Hourly studies still show scope for further gains and we could see a retest of 116.40 intraday. The daily charts are trying to maintain a bear bias but two positive closes weigh. Studies still bearish but close to oversold levels.

Resistance:
117.50(M) Nov 15, 17 Low, Cloud Base Sell A Failure, Buy Break
116.95(M) 10 Day M/A, Tankan Line Sell A Failure
116.60(M) Daily High Nov 24, 38.2% Sell A Failure
116.40(M) Daily High Nov 28 Sell A Failure

Support:
115.85(M) Hourly Support Nov 29 Expect Stalling
115.35(M) Daily Low Nov 27 Sell A Break Below
115.20(M) Daily Low Aug 17 Cover On A Bounce
114.70(M) Daily Low Aug 10, 2% Cover On A Bounce

GBP/USD
Price has faltered just shy of the 12 yr high at 1,9550 and is easing lower again intraday. The underlying trend remains higher on the daily charts in spite of overbought levels being tested and we continue to play the buy dips strategy for now. On the topside above 1.9550 eyes the low 1.98s and then the path is open for 2.00.

Resistance:
2.0045(M) Daily High Sept 9 92 Flat On A Failure
1.9825(M) Daily High Sept 10 92 Take Profit, Buy Break
1.9570(M) 2% M/A Band Flat On A Failure
1.9550(S) 12-yr High, Dec 2004 Buy A Break Above

Support:
1.9425(M) Hourly Lows Nov 28 Buy A Bounce
1.9370(M) Pullback Low Nov 28 Buy A Bounce
1.9305(M) Hourly Lows Nov 24, 27 Buy A Bounce
1.9180(S) Daily High Nov 10 Buy Bounce, Sell Break

USD/CHF
Short trade has been stopped out as the pair continues to rally and hits 1.2060. Hourly studies are close to overbought levels and risk is for failures ahead of the 1.2100 mark. Daily charts are oversold and although we still favor selling failures advice is to keep target and stop levels tight as 1.2015 is a potential base.

Resistance:
1.2250(M) Daily High Nov 24 Flat On A Failure
1.2205(M) Nov 23 lo, Hrly Hi Nov 24 Take Profit, Buy Break
1.2185(M) Daily Range Low Aug 21 Flat On A Failure
1.2110(M) Daily High Nov 27 Sell Failure, Buy Break

Support:
1.2045(M) Hourly Support Nov 29 Expect Stalling
1.2015(S) Daily Lows May 22 & Nov 29 Sell A Break Below
1.2005(M) Daily Low May 17, 2% Cover On A Bounce
1.1920(M) Trend Low May 15 Take Profit, Sell Break

EUR/JPY
152.55 propped and the rally out of here now trades back above 153 and has broken resistance at 153.05. The daily charts are overdone on the topside though and 153.45 could be a short term top so caution is advised for those playing the long side. 151.80 is the level on the downside that needs to hold to keep the bulls in control.

Resistance:
174.75(M) Synthetic Yearly High 92 Take Profit, Buy Break
162.40(M) Synthetic Yearly High 98 Take Profit, Buy Break
154.75(M) 2% MA Band Top Take Profit, Buy Break
153.45(M) Hourly High Nov 29 Take Profit, Buy Break

Support:
152.55(M) High Nov 27, Low Nov 29 Sell Stops Below
151.80(M) Nov 24 Hi, Gap Bottom Buy A Bounce, Sell Break
151.65(M) Daily High Nov 20 Cover On A Bounce
150.50(M) Daily Low Nov 24 Cover On A Bounce

EUR/GBP
The 0.6745/85 range has held for eight sessions and the now trades close to the base of here. Daily trend studies are ticking south and we will go with a break of 0.6745 but could see some more sideways action first. Below here targets a move into the 0.66s and 0.6680 support. Stop & reverse above the range top.

Resistance:
0.6895(M) Jul 12 Lo, Jun 14 Hi Flat On A Failure
0.6850(M) 61.8% Of 0.6960 - 0.6670 Flat On A Failure
0.6820(M) High Sept 11, 200 M/A Flat On A Failure
0.6785(S) 5 Recent Daily Highs Sell Failure, Buy Break

Support:
0.6745(M) Lo Nov 21 & 22, 20 M/A Buy A Bounce, Sell Break
0.6715(M) Nov 8 High, 10,13 Lows 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
Positive readings from daily trend studies including the positive cross from the slow stochs generate a buy signal and we are now looking for levels to get long again. 1.5900 has been tested intraday and with hourly studies still ticking north there is still a chance we could see a 1.5910 break. That said prefer to be buyers on dips.

Resistance:
1.6010(M) Daily High Nov 17 Flat On A Failure
1.5975(M) Daily High Nov 20 Flat On A Failure
1.5935(M) 61.8% Of 1.6010 - 1.5810 Flat On A Failure
1.5910(M) Nov 13 Low, 50% Fibo Sell Failure, Buy Break

Support:
1.5865(M) Hourly Support Nov 29 Expect Stalling
1.5835(M) Hourly Low Nov 28 Buy A Bounce
1.5800(M) Daily Low Sep 28 Buy A Bounce, Sell Break
1.5755(S) Trend Low Sep 25 Cover On A Bounce

USD/CAD
The rally out of 1.1290 continues to push higher and has taken out resistance at 1.1320 and now pushes through the 1.1340 level. Hourly studies are overbought though and risk is for pullbacks and we prefer selling into strength still. Daily charts are bearish but need a break of the 2000-day MA at 1.1285 before becoming confident.

Resistance:
1.1500(S) Daily High Nov 21 Flat On A Failure
1.1470(M) Daily High Nov 22 Flat On A Failure
1.1420(M) 61.8% Of 1.1500 - 1.1290 Sell Failure, Buy Break
1.1370(M) 38.2% Of 1.1500 - 1.1290 Sell A Failure

Support:
1.1285(M) 200-Day MA Line 1% Env Sell Sustained Break
1.1260(M) Daily Lows Nov 7 & 10 Cover On A Bounce
1.1225(M) Uptrend Fm Sep 1 Low Cover On A Bounce
1.1175(M) Daily Low Oct 27,30 Take Profit, Sell Break

AUD/USD
The pairing surged to test 0.7845 overnight, but we booked profit on our long a little early. 0.7849 traded in Asia and the pairing now consolidates below. Daily studies remain bullish, though at mildly overbought levels. Our bias remains up and our favoured strategy is to buy a dip below 0.7800. Hourlies are back at neutral levels.

Resistance:
0.7955(M) Dbl Top Mar 9 & 16 05 Take Profit, Buy Break
0.7925(M) Daily High Mar 22 05 Flat On A Failure
0.7905(M) 2% M/A Band Flat On A Failure
0.7850(M) Hourly High Nov 29 Buy Sustained Break

Support:
0.7775(M) Hourly Lows Nov 27, 28 Buy A Bounce
0.7760(M) Daily Low Nov 27 Buy A Bounce
0.7730(M) Daily Low Nov 23 Buy Bounce, Sell break
0.7675(M) Daily Low Nov 20 Cover On A Bounce