Mizuho Corporate Bank

EUR
Comment: Inching to a new recent low following Friday’s massive sell-off. We see this week’s price action as a ‘downward-sloping wedge’ formation which is unstable. 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 because the Euro is more oversold than it has ever been.
Strategy: Possibly attempt tiny longs at 1.4770; stop below 1.4700. Short term target 1.4900 and then 1.5000.

EUR/JPY
Comment: Consolidating neatly under the bottom of the ‘broadening top’ formation and below the bottom of the Ichimoku ‘cloud’. The longer we do this the more bearish momentum. A weekly close below 163.00 should also add bearish pressure. 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 162.90, adding to 163.70; stop well above 164.25. Short term target 162.00/161.60, then 160.60.

GBP
Comment: A terrible month for the pound so far, but not nearly as bad as September 1992’s 33 cent loss or October 1992’s 23 cent loss. Cold comfort as the Bank of England, the Treasury and the FSA remain tight-lipped. The only one making any sense of thins is the Liberal’s Vince Cable: ‘The doomsday scenario would be that we finish up like Japan did, with ten years of stagnation’. 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 despite eleven consecutive down days.
Strategy: Possibly attempt tiny longs at 1.8645; stop well below 1.8600. Short term target 1.8800, then 1.9000.

JPY
Comment: Rather surprising to see the Yen back up at the 110.00/110.50 pivotal chart area. Once again we shall be looking for it to stall here, always allowing for a brief ‘extension/spike high’. We expect at-the-money implied volatility to increase significantly over the coming month.
Strategy: Possibly attempt tiny shorts at 110.30; stop well above 110.55. Short term target 109.55 then 108.55.