Finotec

Deutsche Bank

EUR USD (1.2960) There was only a 30-pip range for the day, but the Euro still managed to overstep the risk-limit to our bearish strategy (apologies). This development is not to be seen as bullish. It simply highlights the current lack of commitment and of bias in the market at the moment. Even with a Fed meeting in progress and a raft of US numbers ahead, volatility continues to drift lower. Although there are polarized views about the upcoming US data, there is no disagreement about the outcome of the FOMC meeting:boring. Indeed, the market’s current evaluation of the Fed Chairman’s first year in office, whilst largely favourable, has been critical in the sense that Ben Bernanke’s communication has been academic to the point of being clinical. Some clearly miss his refusal to indulge the market’s desire for codeword’s and claim that he is not ‘transparent’. However, clear guidance on future decisions is not transparency – it is clear insight into how the Fed works that makes it transparent. In any case, the lack of guidance owes as much to the current proximity of Fed Funds to the neutral rate as it does to Bernanke’s style. Others miss the Greenspanesque one-liners: irrational exuberance, conundrum, etc. Whatever the reason, the FOMC meeting has ceased to be the market-mover that it once was. We will remain neutral between 1.2860 and 1.3100, which respectively, represent the bearish- and bullish-trigger.

USD JPY (121.40) A second day of modest corrective weakness for the dollar could not avoid pushing through the tight downside limit to our bullish strategy. This has pushed the market back into neutral territory, but not necessarily into danger. We must, however, draw attention to the critical support that currently lies at 120.35. Below there, one should anticipate no reliable demand ahead of 115.60! This would then be the target. To the upside, the dollar will probably run into much better supply on subsequent rallies. We note the first overhead hurdles at 121.90 and at 122.70.

EUR JPY (157.30) Traders continued to draw tickets for the ‘G7-agenda lottery’ yesterday but this had only very little further influence on the price. As before, we continue to monitor the best overhead resistance at 158.60/70.The going to the upside (160.25) ought to become much easier beyond there, although a poor risk-reward profile might make a rally difficult to exploit. Nearby demand points are still not too reliable. They stand nonetheless at 156.80/90 and at 154.00 (critical).

GBP USD (1.9620) Cable rallied briskly right from the beginning of yesterday’s session, encouraged by M&A talk. Later, slowing UK mortgage approvals pointed towards a possibly cooling UK housing market. However, the short-lived upside attempt had already been sufficient to violate our risk-limit and leaves us neutral again. Supports are currently sighted at 1.9605/15 and at 1.9500. The bullish trigger remains at 1.9755.

AUD USD (0.7715) AUD still holds a tight 35- tick range. Nonetheless, this was sufficient to scrape a new low within the latest decline (just above 0.7700). The current target remains 0.7615 with a risk-limit set at 0.7770.

TECHNICAL ANALYSTS, CAPITAL MANAGEMENT

USD/JPY: "Dollar rally continues to struggle with break to marginal new highs. Failure to hold tight 121.65 yen support would allow another 24-36 hours of consolidation and a pullback to 120.60. Continue to buy dips against 119.70 pivot point, for next leg of rally to 125.90."

EUR/USD: "The euro continues to consolidate/correct before the next leg of the downtrend. With the short-term upside break of $1.2945, there is scope in a flat pattern back to $1.3045 and even a full 50 percent pullback to $1.3120."

USD/CHF: "Dollar is attempting to break 1.2565 and confirm next leg up to 1.2625. Failure or a loss of 1.25 signals more consolidation and 1.2420 again."

EUR/CHF: "The structure of the rally is near complete and thus beware a reaction back below 1.62 that could start an interim corrective phase that targets 1.6055. As support at 1.62 contains, there is a chance to see a run at 1.6280 before going down."

GERRY CELAYA, REDTOWER RESEARCH

USD/JPY: "The 121.20/00 level may hold up, favoring 123 for 125 still.

EUR/USD: "The $1.2980/1.320 level should remain sticky. If the data holds up today, still like $1.2860 and lower for $1.2660 below this."

GBP/USD: "Cable still favoured to crack $1.9550 for $1.9270.

EUR/GBP: "To find sellers ahead of 66.30 pence?"

EUR/JPY: "Watch for dips, still hoping for 156 probes to buy on, chances are this is not seen, targets to 160/163 are still open on the charts."