Bank Recommendations 30.11.2006

Deutsche Bank

EUR USD (1.3165) Yesterday the single currency reversed its fortunes slightly amid dubious rumours that hedge funds were taking profits on longs. It was only after the release of the upwardly revised US Q3 GDP number that it briefly accelerated its downward correction to a 1.3130 low for the day. However, the euro was already well on its way down when the data came out. This was also at the time when there was some talk doing the rounds that corporates were trying to push it lower in order to pick it up later at cheaper prices. This is simply too hard to believe – even if they had the power to do so. In a similar way, it is questionable that the backward-looking GDP revision suddenly made some realise that they did not want to hold euros any longer. It seems that day-traders were trying every trick in the book to get the spot rate lower. The weak US housing data did not change the picture much, which means that the thorn in the side of the US economy is ignored or else the market has simply adapted to it. Be that as it may, with talk of BoJ diversifying as much as 30 per cent of its reserves into euros it seems as if the strong-arm tactics of many short-term traders are aimed at securing a lower euro in order to go long. We maintain our positive outlook for the euro with the target set at 1.3290. Once this is overtaken 1.3595 would be in the pipeline. The risk-limit to the bullish outlook stands at 1.3085.

USD JPY (116.15) In the early morning session, Japanese industrial production that came in higher than expected proved to have been enough to convince some traders that a rate hike might be on the cards for December and, obviously, to assuage earlier fears of about the negative impact that rate hikes might have on the economy. Nevertheless, an uptick during the day was just enough to tip us out of a bearish strategy. For the time being we stick to a neutral position. To the downside, we reckon with weak support at 115.60, which will trigger further weakness to 114.05 if undercut. Overhead, resistances are visible at 116.90 and at 117.90.

EUR JPY (152.95) The cross continued with what is becoming ‘business as usual’ as it ratcheted up to yet another fresh 153.45 high that was immediately followed by renewed sales But this morning it is back hovering at the highs. It looks like the attention here has moved from interest rate differentials to traders not expecting any verbal intervention to the euro’s recent strength. The risk-reward considerations are still not favourable to enter into a strategy. We are expecting to run into hurdles at 153.85/90 and at 154.50, the latter also marks the upside potential for now. Weakness will be guarded by the 152.10 and 150.90 supports.

GBP USD (1.9530) Sterling hit a fresh high at 1.9545 yesterday before being pushed down again. This move was powerful enough to hit our support, and allow us to re-enter a new bullish strategy. The new objective stands at 1.9640 and once cleared we would look for gains to 2.0400. Weakness should not now violate our 1.9370 risk-limit.

AUD USD (0.7855) Yesterday’s animated session allowed the Aussie to achieve our 0.7855 objective, where we also expected to find some initial offers. Beyond the latter, we expect to see further strength to 0.8170. Once triggered, 0.7815 will serve as the risk-limit for a continued bullish view. Intermediate resistance is visible at 0.7885/90.

IFR Markets

EUR/USD
Another new trend high yesterday, but the weak NY close turned the daily studies bearish, with the RSI heading lower, the stochastic poised for a bearish cross and the high readings on the ADX flagging a corrective move. We will try a conter-trend short on a bounce or sell a sustained 1.3120 break, if the hourlies support.

Resistance:
1.3270(M) 2% M/A Envelope Flat On a Failure
1.3265(M) Weekly Low Mar 14 05 Flat On A Failure
1.3215(M) Daily High Nov 29 Sell A Failure, Buy Break
1.3185(M) Prior Hrly Lows Nov 29 Sell A Failure

Support:
1.3120(M) Daily Low Nov 28 Buy A Bounce, Sell Break
1.3090(M) Daily Low Nov 27 Cover On A Bounce
1.3010(M) 10-Day MA Line Buy A Bounce
1.2925(M) Daily Low Nov 23 Buy A Bounce, Sell Break

USD/JPY
Yesterday"s short was stopped for a small loss on the reversal, which peaked at 116.55 in Asia. Daily studies are turning up from oversold levels, with the stochastic poised for a bullish cross, while the high readings on the ADX favour a corrective move. Need to clear 116.60 to confirm a new uptrend. 115.85-90 initial support.

Resistance:
117.75(M) Nov 20, 21 Lows Flat On A Failure
117.50(M) Nov 15, 17 Low, Cloud Base Sell A Failure, Buy Break
116.80(M) 10 Day M/A, Tankan Line Sell A Failure
116.60(M) Daily High Nov 24, 38.2% Sell A Failure

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

GBP/USD
The powerful daily uptrend ran into resistance from the 12-yr high from Dec 2004 at 1.9550 yesterday and the soft close has stalled the overbought daily studies, with the RSI now heading lower and the ADX flagging a corrective move. We will stay with the trend, as long as 1.9370 holds. Hourlies are coming off oversold levels.

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
1.9620(M) 2% M/A Band Flat On A Failure
1.9550(S) 12-yr High, Dec 2004 Buy Break, Sell Failure

Support:
1.9425(M) Hourly Lows Nov 28 Buy A Bounce
1.9370(M) Daily Low Nov 28 Buy A Bounce, Sell Break
1.9305(M) Hourly Lows Nov 24, 27 Cover On A Bounce
1.9275(M) 38.2% Of 1.8835 - 1.9545 Take Profit

USD/CHF
1.2015 was the base on the last two sessions. 1.2005/15 was the daily range base in May and June, so this area is a major support level and our downside pivot. Daily studies favour a corrective move, with the RSI headed up and the stochastic poised for a bullish cross. We will try a counter trend long position on a 1.2060 dip.

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
1.2120(M) Hrly High Nov 24 Sell Failure, Buy Break

Support:
1.2060(M) Prior Hrly Highs Nov 29 Buy A Bounce
1.2015(S) Daily Lows May 22 & Nov 29 Buy A Bounce
1.2005(M) Daily Low May 17 Buy A Bounce, Sell Break
1.1920(M) Trend Low May 15 Take Profit, Sell Break

EUR/JPY
Yesterday"s re-established long remains in play, with our target in view, so we have tightened our stop to our entrey level. Daily studies remain overbought and the RSI is heading lower, while the stochastic has stalled, which is a concern, but our target is close enough and the trend is strong, so we will stay with the trade. Hourlies are at neutral levels.

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

Support:
152.85(M) Hourly support 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
Short triggered overnight by the break below the Nov 21 and 22 lows near 0.6745, but the move stalled at 0.6738 and rebounded to trade around 0.6760. Dailies are bearish with plenty of room to run and the hourlies are now close to overbought, so a test of the key support at 0.6715/20 is possible in coming sessions. We will tighten the stop on a break.

Resistance:
0.6820(M) High Sept 11, 200 M/A Flat On A Failure
0.6795(M) Trend Hi Sep 29, Nov 16, Buy Stop Above
0.6785(S) 5 Recent Daily Highs Sell Failure
0.6765(M) Hrly Highs Nov 29 Sell Failure

Support:
0.6720(M) 61.8% Of 0.6670 - 0.6795 Cover On A Bounce
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
Long taken overnight, as prices retraced more than 50% of the 1.6010/1.5810 fall at 1.5910, that also being the Nov 13 swing low. Daily studies have begun reversing to buys from near o/s readings at the start of the week, so there is room for prices to run near-term. Our target is a long-term channel top, now at 1.6090. Support is at 1.5865 and 1.5835.

Resistance:
1.6090(S) L-T Channel Top Take Profit, Buy Break
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

Support:
1.5865(M) Hrly Hi/Lo Nov 27/28 Buy A Bounce
1.5835(M) Daily Low Nov 28 Sell Stop Below
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
Short taken overnight, as prices rebounded to the Nov 22 low at 1.1385 and stalled near there, with overbought hourlies. Using a fairly tight stop beyond the figure and looking for a retest of the subborn support in the 1.1290 area from Tuesday. Dailies are mixed but mostly remain bearish with ADX falling as prices rebounded. 1.1330-35 first support.

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
1.1395(M) Nov 23 Lo, 29 Hi, 50% Buy Stop at 1.1410

Support:
1.1335(M) Hourly Rsst Nov 28, 29 Cover On A Bounce
1.1290(M) Daily Low Nov 28 Take Profit
1.1285(M) 200-Day MA Line 1% Env Buy Bounce, Sell Break
1.1260(M) Daily Lows Nov 7 & 10 Cover On A Bounce

AUD/USD
New trend high"s at 0.7855 recorded overnight and we bought the break in Asia, as the hourlies are still at neutral levels, so the price has room to extend. Daily studies are overbought, but remain bullish, but the high readings on the ADX caution that a correction is close. Progress is limited so far, our target is a move towards the 2% band, with a tight stop.

Resistance:
0.7990(M) Mar 8, 9 2005 Highs Flat On A Failure
0.7955(M) Dbl Top Mar 9 & 16 05 Sell A Failure, Buy Break
0.7925(M) Daily High Mar 22 05 Sell A Failure
0.7920(M) 2% M/A Band Take Profit

Support:
0.7825(M) Hourly Support Nov 30 Sell Stops Below
0.7805(M) Uptrend Fm Nov 17 Low Buy A Bounce
0.7775(M) Hourly Lows Nov 27, 28 Buy A Bounce
0.7760(M) Daily Low Nov 27 Buy A Bounce