USD/CAD may rally back to 1.3040 post Fed rate hike (if any); but look for decline to 1.2860 thereafter
Euro/US Dollar
(1.2176) - 06:39 GMT, Sep 21, 2004
EUR/USD - the currency pair recovered somewhat after seeing chart support at 1.2125. It may yet rise towards 1.2220, but this is inconsequential in the face of the FOMC meeting set today. Nonetheless, a small uptick to test the 1.2270 swing level does not seem likely from here (1.2176) in the light of an almost certain bumping up of rates by another 25 basis points. The response to a rate hike may be mild however, as it has been telegraphed for several weeks now. This development really forces us to pay attention to one of the possibilities we were tracking, which is a large, multi-month triangle which commenced in June. A final downmove to 1.2050 area is needed to complete the pattern, so until such time that this particular route is discredited, we hesitate to jump into a bullish mode without giving it a chance to play out. A Fed bump up of rates 25 basis points today may well cause the single currency to fall to the mid- to low 1.2000s. it may find demand at those lower levels however.
The slightly longer-term outlook is different however. We favor the outlook which eventually leads to a break of 1.2310, at which point the bias to the upside becomes virtually certain. And on a larger overview, we still maintain 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 before year-end.
There is no logic to holding a position ahead of the Fed decision today. Square long positions and re-position after the FOMC meeting is over.
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Recommendations:
Close long EUR position (from 1.2181 and 1.2231) at current level (1.2176).
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British Pound/US Dollar
(1.7843) - 06:44 GMT, Sep 21, 2004
GBP/USD - the currency pair recovers somewhat after support was found at 1.7815. However, it may be limited to 1.7900 - 1.7910. Tuesday's FOMC meeting has to be factored in place. A 25 basis point hike by the Fed may cause further decline to 1.7720. The technical conditions remain the same. On the positive side, a break of 1.8030 top triggers a new series of advances -- there is no barrier between 1.8030 and 1.8500. Fundamentals keep getting in the way however. U.K. house prices probably fell for the first time in more than a year in August, the Royal Institution of Chartered Surveyors said today, adding to evidence that five interest rate increases since November are cooling the housing market. And therefore interest rates may not need to rise much further -- which of course weakens the GBP in the FX markets.
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Recommendations:
Stand aside.
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US Dollar/Japanese Yen
(110.10) - 06:44 GMT, Sep 21, 2004
USD/JPY - a volatile flip-flop in price continues. This is the general expectation if the triangle pattern we spoke about earlier is indeed operative, which limits the upmove to 110.40. We will take a chance that the pattern will soon be completed, and so we expect the currency pair to break through the 109.40 support thereafter, and initiate a new series of declines to the downside, which first targets the downside base at 108.75, then breaches support to bring about 107.00 quickly.
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Recommendations:
Stand aside.
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US Dollar/Swiss Franc
(1.2728) - 06:44 GMT, Sep 21, 2004
USD/CHF - there may be a small downtick to 1.2680 area, but the rally may indeed be going further towards 1.2800 - 1.2850 resistance area, post the FOMC meeting Tuesday. The downtrend resumes thereafter, and may be bound for 1.2380 next. Expect further declines to 1.2200 further out.
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Recommendations:
Close short USD position (from 1.2607 and 1.2668) at current level (1.2728).
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US Dollar/Canadian Dollar
(1.2952) - 06:44 GMT, Sep 21, 2004
USD/CAD -- The currency pair fell to 1.2925, and consolidates somewhat, but the momentum of the descent suggests that it might head further towards 1.2860. And from there, it should test the 1.2685 trough.
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Recommendations:
Stand aside.
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Australian Dollar/US Dollar
(0.6990) - 06:45 GMT, Sep 21, 2004
AUD/USD - support may firm at .6950 - 1.6940 after the Fed hike, but assume further upmove to .7040 thereafter. The outlook becomes significantly more positive once .7050 resistance is taken out. A rally towards .7100 - .7130 is still expected to take place thereafter.
We will keep this position going into the FOMC meeting.
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Recommendations:
Bought AUD at 0.6909, 0.6962 and 0.6990. Keep stop-loss at 0.6930. Keep profit target at 0.7225.
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NZ Dollar/US Dollar
(0.6600) - 06:47 GMT, Sep 21, 2004
NZD/USD - the currency prepares for the Fed rate hike -- support should firm up at .6550. The currency however should accelerate higher thereafter. The wide U.S. current account/trade gap, and the outlook of further RBNZ tightening, should continue to underpin the rally as the dollar runs out of steam. The uptrend should be reaffirmed shortly -- the Kiwi should eventually make a move towards the .6750 top, then extend gains towards the .7100 high for the year. If you have to pick a medium-term bet, long Kiwi should be a good candidate from both technical and fundamental perspective.
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Recommendations:
Bought NZD at 0.6464 to 0.6611 (4 observations). Keep stop-loss at 0.6550. Keep profit target at 0.7000.
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Euro/Japanese Yen
(134.10) - 06:48 GMT, Sep 21, 2004
EUR/JPY - the cross did find support at 133.20. The cross should continue to rally from here (134.03) -- the next major focus being the 137.00 - 138.00 major resistance.
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Recommendations:
Bought EUR at 133.91 and 134.02. Keep stop-loss at 132.80. Keep profit target at 138.00.
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Euro/Swiss Franc
(1.5496) - 06:49 GMT, Sep 21, 2004
EUR/CHF - the cross broke above 1.5483 resistance, and has been to 1.5500, which should be taken out momentarily. The cross should continue the upwards course and push through to 1.5550 and higher -- perhaps to 1.5600.
We will keep this position goimg into the FOMC meeting.
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Recommendations:
Bought EUR at 1.5416. Keep stop-loss at 1.5430. Keep profit target at 1.5600.
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Euro/British Pound
(0.6825) - 06:50 GMT, Sep 21, 2004
EUR/GBP - the cross may have indeed found lasting support at .6780 -- further decline to .6770 - .6760 may not happen. The uptrend resumes thereafter and should eventually push through .6856, which may trigger a rally to .7000.
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Recommendations:
Stand aside.
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British Pound/Japanese Yen
(196.51) - 06:52 GMT, Sep 21, 2004
GBP/JPY - the uptrend did correct , found support near 195.75. It should make a go at 198.65 top thereafter, then make a beeline for the 205.00 target.
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Recommendations:
Bought GBP at 196.66 and 196.75. Keep stop-loss at 195.10. Keep profit target at 205.00.
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British Pound/Swiss Franc
(2.2699) - 06:52 GMT, Sep 21, 2004
GBP/CHF - the cross consolidates after it broke through the 2.2700 resistance, but may be set for a new breakout once support at 2.2700 is confirmed. Resistance effectively reside at just below 2.2800, and if taken out, we reinstate a 2.3000 target.
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Recommendations:
Stand aside.