Mizuho Corporate Bank

EUR
Comment: Consolidating neatly in a bullish ‘pennant’ continuation pattern just below the all-time high at 1.3815. The Euro is overbought but bullish momentum is strong and many have been wrong-footed. Immediate upside pressure is maintained while above 1.3700.

Strategy: Strategy remains unchanged: attempt longs at 1.3780, adding to 1.3750; stop below 1.3650. Target record high 1.3815, then 1.3875 and then 1.4000.

EUR/JPY
Comment: Consolidating in a narrow range under the new all-time high at 168.95 and above the 9-day moving average at 167.73. If we can hold above here again today another upside probe is likely mid-week. If not expect more work between 167.00 and 168.50 all week. The Euro is no longer overbought against the Yen and we maintain our target at 170.00 for some time this month.

Strategy: Attempt small longs at 168.00, adding to 167.75/167.50; stop well below 167.00. Cover ahead of 168.95 but look to re-buy on a sustained break above 169.15 for 170.00/170.50.

GBP
Comment: Another multi-year high at 2.0405 and Cable may hold below here again if the Euro cannot manage to post a new high. We remind that over the next ten days there is a chance of a squeeze to 2.0500, at which point we would be looking for a bout of consolidation. The problem is that so many have got the US dollar weakness completely wrong that there are still many positions that need to be sorted out and so trends might continue for longer and further than our conservative estimates.

Strategy: Attempt longs at 2.0350, adding to 2.0300; stop well below 2.0200. Target 2.0400, maybe 2.0500.

JPY
Comment: Consolidating slightly unsteadily at these fractionally lower levels and we shall be looking for a re-test of the top of the Ichimoku ‘cloud’ (121.13). A drop below here, while very unlikely today, should send at-the-money implied volatility squeezing higher to 8.50%. The US dollar is not oversold and momentum is bearish. Expect random sideways work today, probably between 122.40 and 121.40.

Strategy: Attempt small shorts at 122.00/122.15; stop above 122.70. Cover half of shorts at 121.50 and the other half ahead of 121.15.