Mizuho Corporate Bank

EUR
Comment: Record high and giving back almost no ground what-so-ever. Dawning on many that the US dollar is deliberately being shrunk and that there is nothing on the immediate horizon to stop the rot. Expect a little more work below 1.5250 this morning, maybe all day, before trying to squeeze higher again.

Strategy: Attempt small longs at 1.5225, adding to 1.5100; stop below 1.4950. Short term target 1.5250 then 1.5350, maybe 1.5550.

EUR/JPY
Comment: Last week’s ‘spike high’ at 161.43 marks an important interim high in the very large topping process that has been in place since January 2007. A weekly close below 155.50 would add yet more downside pressure. Note that we have gone from terribly overbought to oversold in just four trading days which will keep upside pressure on implied volatility, here and in many currencies. Downside pressure increases considerably if we hold below today’s opening high at 157.47.

Strategy: Sell at 156.50, adding to 157.45; stop above 159.00. Short term target 155.80, then 154.00.

GBP
Comment: Surprisingly little to add since Friday with price action over the last three days is seen as a small ‘flag/pennant’ which should set up for an imminent test of the top of the Ichimoku ‘cloud’. Note that this is extremely thick and prices might consolidate within it for several weeks. A sustained break above 2.0000 will force many, many people to re-think Cable where consensus opinion is tightly clustered for a weaker pound throughout this year.

Strategy: Strategy remains unchanged: buy at 1.9855/1.9800; stop below 1.9600. Short term target 1.9960/2.0000, long term 2.1000.

JPY
Comment: Rattling many cages as we collapse to the lowest level since January 2005. Remember the low in 2005 was 101.67 and 101.25 in 1999. At this sort of speed the risk of verbal intervention is high; it is also likely to be of limited use. February’s monthly close below 104.00 constitutes an important break lower and will set off the next phase of generalised US dollar weakness. Yen crosses are looking very top-heavy.

Strategy: Attempt shorts on a bounce to 103.00, adding to 104.00; stop above 105.50. Add to shorts on a sustained break below 102.50 for 101.80.