UBS FX Technical Report
EUR/USD – With the MACD above its zero line, signifying bullish conditions, potential remains for a fresh extension of the uptrend. We expect the pair to move towards 1.3345, the July extreme then test the critical resistance at 1.3417, the June 19 failure high. Near-term support is at 1.3190, the Friday low, ahead of the strong level at 1.3120, the 38% of the July advance, which is expected to hold any downside. No positions recommended.
USD/JPY – We continue to watch for a close above the key resistance at 100.02, the 62% retracement of the July sell-off. Such a development would see the MACD crossing above its zero line, signalling an outright bullish picture. The next resistance focus is at 101.53, the July high and then, 105.50, the 62% retracement of the June 2007 to October 2011 bull trade. We will recommend a new long on a close above 100.02, targeting 105.20, with stops initially at 97.50.
GBP/USD – On Friday the pair bounced sharply and tested the resistance offered by the 62% retracement of the latest sell-off at 1.5308. A closing break above this would trigger further upside to again challenge the 1.5394, the longer term retracement of the June-July decline, which was defended well on a closing basis last time. Support is at 1.5124, the 50% retracement of the July advance. No positions recommended.
USD/CHF – The sharp advance seen since Wednesday, to unwind the downside extremes, failed to extend further and the pair after posting a new recovery high, sold off sharply on Friday. With the MACD below its zero line, risk remains for a move below the first support at 0.9229, last week's low to test the significant June extreme at 0.9130. Resistance is at 0.9390, Friday high. No positions recommended.
AUD/USD – The pair has weakened further, extending the pattern of lower highs/lows. Continued downside is on the cards and potential is for a test of critical support at 0.8545, the 50% retracement of the October 2008 to July 2011 bull trade. We maintain our short recommendation established at 0.9240, targeting 0.8560. The stop remains just above the 50% retracement of the latest sell-off, however as a new low was posted this morning, this has been recalculated; now standing at 0.9100.
USD/CAD – After failing to close below the significant support at 1.0241, the 62% retracement of the May/July advance, the pair advanced since last Wednesday. Immediate resistance is at 1.0428, the 50% retracement of the July sell-off ahead of the higher 62% retracement point at 1.0470. A closing break above this would be a bullish development, indicating scope for further upside. No positions recommended.
EUR/CHF – After the sharp advance, the cross came under pressure from key resistance at 1.2404, the 62% retracement of the July sell-off. This weakness is again approaching critical support at 1.2313, the 62% retracement of the June/July advance, which was held on closing basis twice last week. A closing break below this would be negative, triggering further sell-off towards 1.2219, the June low. No positions recommended.
EUR/GBP – As a reaction to sharp advance, the cross is correcting to unwind the overextended upside conditions. Support is at 0.8649, the 62% retracement of the advance from July 23, which is expected to hold. We will look for opportunities to re-establish longs. With the bull trend intact we still believe the directional risk remains to the upside to test critical resistance at 0.8815, the February 25. No positions recommended yet.
EUR/JPY – We continue to watch for a closing cross higher in the momentum tools, to further strengthen the bullish themes as reflected by the MACD above its zero line. Such a signal would trigger further upside extending the pattern of higher highs/lows towards 133.80, the May high and then onto the critical 139.22, the June 2009 high. We will recommend a new long on a close above 131.70, targeting 139.00 and the stop at 128.80, just beneath the 50% retracement of the June/July advance.
