GBP/USD drifts lower to 1.7900; EUR/USD may fall to 1.2210 - 1.2205 -- but the rally should resume, take out 1.2310 resistance
Euro/US Dollar
(1.2231) - 06:36 GMT, Sep 15, 2004
EUR/USD - the single currency failed to make any breakthrough after momentum generated by the whopping U.S. current account deficit faded. The single currency may yet drift lower towards the 1.2210 - 1.2200 area, as expected. But this may be just marking time, ahead of the Empire State manufacturing data, business inventories, and industrial production later on the day. The data on all three is expected to be lackluster, and potentially positive for the euro and other major currencies, and the bond market, which is expected to break through important resistance levels soon. Watch the very high correlation between euro and U.S. 10-yr notes -- and a significant breakthrough in bonds may just push the euro over the 1.12306 top. No change in the outlook -- however, we turn more bullish only ater the single currency goes above 1.2310 -- which has indeed shaped up to be a firm trendline technical resistance. We also continue to reiterate that there is no real reason for bulls to celebrate until 1.2530 hypothetical resistance is taken out. This level is shaping up to be the major resistance in the current investment cycle. Take out 1,2530 top in turn, and you get a run-up to the 1.2925 high we saw earlier in the year.
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Buy half of long stake at current level (1.2231); Buy the rest at 1.2210. Stoploss: 1.2120. ObjectiveL 1.2500
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Recommendations:
Buy EUR at 1.2231. Stop-loss: 1.2120. Profit target: 1.2500.
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British Pound/US Dollar
(1.7917) - 06:39 GMT, Sep 15, 2004
GBP/USD - the currency pair has been to as high as 1.8031 after a whopping U.S. current account deficit hammered the dollar. But the momentum faded, and the rally ran into a brick wall. So the currency pair has been lower, and has already gone below our 1.7950 ideal support. It may drift lower further to 1.7900 area -- as liquidation takes place ahead of the U.S. numbers today. But longer-term outlook still look bright -- positive fundamentals may be at work here -- the odds of further BoE rate hikes down the road have rose again as a consequence of mounting inflation pressures -- which could provoke a further 25 basis point hike this year. The next target may be 1.8150. The next bigger move, post 1.8150, should focus next at 1.8500 - 1.8550 resistance area. The uptrend remains suspect until it takes out 1.8150.
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Buy half of lonf stake at current level (1.7917); Buy the rest at 1.7900; Stoploss: 1.7800; Objective: 1.8150
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.Recommendations:
Buy GBP at 1.7917. Stop-loss: 1.7800. Profit target: 1.8150.
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US Dollar/Japanese Yen
(109.57) - 06:42 GMT, Sep 15, 2004
USD/JPY - the currency pair fell further and has been to 109.40 but recovered and tests resistance at 109.80 currently. The rebound may extend to 109.90 but no change in the view nonetheless -- the pair should resume the downtrend after completing the multi-week consolidation phase. The next targeted downside level may be 108.75 base, but any breach of support should bring about 107.00 quickly.
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Sell at current level (109.57); sell some more at 109.85. Stoploss: 110.80; Objective: 107.00
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.Recommendations:
Sell USD at 109.57. Stop-loss: 110.80. Profit target: 107.00.
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US Dollar/Swiss Franc
(1.2607) - 06:44 GMT, Sep 15, 2004
USD/CHF - minor support at 1.2550 generated a small bounce which may end at circa 1.2630 - 1.2640. But the downtrend resumes thereafter, and may be bound for 1.2380 next. The downtrend reassert soon -- expect further declines to 1.2200 further out.
Sell half of stake at current level (1.2607); sell more at 1.2635; stoploss: 1.2750; Objective: 1.2200
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Recommendations:
Sell USD at 1.2607. Stop-loss: 1.2750. Profit target: 1.2200.
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US Dollar/Canadian Dollar
(1.2952) - 06:46 GMT, Sep 15, 2004
USD/CAD -- the currency pair fell much lower than expected, and consequently, the recovery should end below the recent 1.3020 top -- it may in fact peak at 1.2980 area. Nonetheless, the on-going rally from the 1.2914 support is countertrend -- the downtrend should resume thereafter, and may lead to the 1.2680 base further out.
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Recommendations:
Sell USD at 1.2952. Stop-loss: 1.3065. Profit target: 1.2685.
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Australian Dollar/US Dollar
(0.6990) - 06:49 GMT, Sep 15, 2004
AUD/USD - no change in view -- the currency did rise further, and has been to .7048. But it also brought in overbought conditions, and the currency pair falls back as expected, probably to .6970 - .6960 area. A rally towards .7100 - .7130 is still expected to take place thereafter.
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Protect your longs: adjust your trailing stop to .6930 for now. Adding to position at current level (.6990).
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Recommendations:
Bought AUD at 0.6909. Move stop-loss from 0.6970 to 0.6930. Keep profit target at 0.7225.
Buy AUD at 0.6990. Stop-loss: 0.6930. Profit target: 0.7225.
