Mizuho Corporate Bank

EUR
Comment: Still looking ‘heavy’ but clinging to Tuesday’s low at 1.4815. Two consecutive ‘doji-type’ candles suggest much instability at these levels. One-month at-the-money implied volatility could squeeze a lot higher than 10.50% if prices were to suddenly reverse some of the declines of the last two weeks. Wait and watch for a dramatic reversal this week.
Strategy: Possibly attempt small longs at 1.4855; stop well below 1.4800. Add to longs on a sustained break above 1.5000 for 1.5100 short term and then 1.5200.

EUR/JPY
Comment: After giving up almost half of prior gains in just five days, we shall allow for consolidation between 161.00 and the bottom of the Ichimoku ‘cloud’ for a day or two. A weekly close below 163.00 should add to bearish momentum. We then expect a drop to 158.00 within the fortnight and further out a slide to 152.00. Below here and the long term picture gets seriously interesting.
Strategy: Sell at 162.75, adding to 163.40; stop well above 164.25. Short term target 161.60, then 160.60.

GBP
Comment: Two massive consecutive weekly declines as the Bank of England’s inept handling of the situation is increasingly apparent. Ten consecutive down days, more oversold against the dollar than it has been since 1992, weakest since January 1997 on a Trade Weighted basis; this sort of thing is obviously not sustainable. It has now retraced 61% of the rally from November 2005’s 1.7050 to last year’s high at 2.1162. No signs of basing yet so wait for something a lot clearer.
Strategy: Possibly attempt tiny longs at 1.8675; stop below 1.8600. Short term target 1.8800, then 1.9000.

JPY
Comment: Bouncing from the 108.50 area and likely to attempt a cautious upside test of 109.75/110.00 this morning. We expect prices to stall here and drop back down late today or Friday. We expect at-the-money implied volatility to increase significantly over the coming month.
Strategy: Attempt shorts at 109.50; stop above 110.55. Short term target 108.50 then 107.50.