By Saxo Bank Strategy Team
Sales Trading

Published: Dec. 29 2004, 07:25 GMT
USD looks to weaken to new extremes vs. EUR and CHF

Japanese verbal intervention pushes EUR/JPY to near 6-year high, but may not have much further effect.



Note: Between Christmas and New Years, there will be only one daily publication. This will be the morning briefing for the European session.



MAJOR HEADLINES – PREVIOUS SESSION



Japanese verbal intervention warnings can hardly be considered substantive, as strategically, Japan will need to flush more of its USD reserves in the New Year.

Thin Asian session sees test of range as USD first strengthens and then weakens late in the session



















THEMES TO WATCH – UPCOMING SESSION









Hardly a catalyst in site for today – as the market focuses on whether the USD will weaken to new lows against the EUR and CHF.

US Treasury recovery from a sell-off was key in preventing further strength – though treasuries probably need to rally a bit more to avert risk of any new signs of USD strength.

Trading Note: The pause in the weak USD trend may turn out to be brief indeed if we are set for a break to new highs in EUR/USD and lows in USD/CHF today. The Japanese are blowing hot air at this point with their verbal warnings, and the bottom could drop out of USD/JPY at any time.







EURUSD

EUR/USD tested 1.3570 “retracement support” successfully and headed back to the top of the range as of this writing just below 1.3640. The pair may be ready for a break higher and could test the major target of 1.3850 soon.

[font='trebuchet ms', arial, sans-serif]Resist.1.38391.37151.36131.34671.3343Support
[/font]






GBPUSD

GBP/USD was on a roller coaster yesterday, breaking all kinds of support levels, but shows signs of pulling itself higher today, though the EUR is still pressuring the GBP and UK mortgage data is up at 09.30 GMT today. Support comes in around 1.9280/1.9300 and a swing back through 1.9370 encourages a go at the 1.9550 high.

[font='trebuchet ms', arial, sans-serif]Resist.1.95001.94251.93471.93151.9280Support
[/font]






USDJPY

USD/JPY remains rangebound on the Finance Minister’s rhetoric, but his words may have little effect further out as USD/JPY may follow through lower to 102.00 if the 103.50 resistance area holds. Further out, a test of the key 100 level may await.

[font='trebuchet ms', arial, sans-serif]Resist.106.10104.71103.08101.93100.54Support
[/font]






EURJPY

EUR/JPY can only find upside as long as traders are willing to bid up EUR/USD and are afraid of trading USD/JPY on intervention fears. The pairs bullish days are numbered, even if we do see new 6-year highs above 140.90 in the coming sessions. Support is 140.50.

[font='trebuchet ms', arial, sans-serif]Resist.141.70141.07140.29139.81139.18Support
[/font]






USDCAD

USD/CAD is mired well below 1.2220 resistance and could follow through lower through 1.2140 support and on to perhaps 1.2030 or below in the coming sessions.

[font='trebuchet ms', arial, sans-serif]Resist.1.26031.24111.21701.20271.1835Support
[/font]






USDCHF

USD/CHF is coming into its own as the upward pressure on EUR/CHF was at least temporarily removed yesterday and overnight. The pair may slice lower through the 1.1300 recent low and could make it to 1.1250 and then all the way to 1.1160 in the new year.



[font='trebuchet ms', arial, sans-serif]Resist.1.16261.15021.13601.12541.1130Support
[/font]






AUDUSD

AUD/USD is keeping its poise just below the 0.7800 level and may be ready for a try higher at the 0.7945 high from late Nov. 0.7750 is support.

[font='trebuchet ms', arial, sans-serif]Resist.0.79670.78580.77890.76410.7533Support
[/font]






NZDUSD

NZD/USD is disappointing on pressure from AUD/NZD, but if the pair can manage to re-attain 0.7230, then a try at the 0.7275 and slightly beyond may be in the cards. 0.7150 is support.

[font='trebuchet ms', arial, sans-serif]Resist.0.73500.72780.72380.71340.7062Support
[/font]




The support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur