Mizuho Corporate Bank

EUR
Comment: When all are losing their heads, the baby tends to get thrown out with the bathwater. Time for caution and to think strategically. The Euro has seen the biggest quarterly ever (and we still have another 3 weeks to live through), and we have dropped seven consecutive weeks in eight. Oversold is an understatement and at-the-money implied volatility should creep higher still. Unsustainable but too dangerous to buy into yet. Wait and watch for a dramatic ‘spike low’.

Strategy: For those who really have to: attempt tiny longs at 1.4300; stop below 1.4200. Short term target 1.4400, then 1.4540.

EUR/JPY
Comment: Having been ridiculed all too often for clinging stubbornly to our long term view, things have moved swiftly in our favour this week. There is more to come and traders are advised to look back to 1997 and 1998 to see what might happen next. All Yen crosses are similar, with GBP/JPY and NZD/JPY leading the way. For this morning, and maybe all day, expect this cross to hold above today’s low at 150.60 so that we think carefully of the wider implications of where and how the ‘carry trade’ will unwind. Next week we should collapse again if we close below 154.00 today.

Strategy: Sell at 152.50, adding to 153.50; stop above 155.00. Short term target 150.60, then 147.00.

GBP
Comment: This is a joke! It is obviously unsustainable but who only knows where this chaos will end up. Stand aside if possible and wait until you see the whites in their eyes, probably somewhere between 1.7700 and 1.7500.

Strategy: Only if you have to: possibly attempt tiny longs at 1.7595; stop below 1.7500. Short term target 1.7800, then 1.8000.

JPY
Comment: Dropping like a stone as we hold below the ‘neckline’ of a small ‘head-and-shoulders’ top. Over the last five days alone the Yen has gained 5.75% versus the Australian dollar and 3.65% versus the Euro. There is a lot more to come as we complete very major long term topping patterns in the charts. For this morning expect the Yen to hold above the bottom of the Ichimoku ‘cloud’ and the Tokyo low at 105.67. Assuming we hold below 107.65, bearish pressure increases for another massive clear-out next week and over the coming month. One-month at-the-money implied volatility is expected to soar to 16.00%.

Strategy: Sell at 106.60 but only if prepared to add to 107.35; stop well above 108.25. Short term target 105.65/105.50, then 104.00.