EUR/USD: The break above 1.2840 has opened the way for renewed gains towards the next objective of 1.2980/1.3040. The only thing holding back the euro is the substantial short-USD positions established on the pair, which may lead to some sideways trading in the next two weeks. The Fed pause is already priced in and so is a statement saying that the Fed will follow economic data before deciding on the next direction of rates. This means the only other disturbing issue for euro-longs is a possible sell-off in emerging market currencies or stock markets in general, which may lead to some USD repatriation. Use such opportunities to establish fresh long euro positions or add to existing longs. A break above 1.2980, holding since June ’06 and then 1.3125, holding since April ’05 will add to the upside momentum for the next objective of 1.3460, the NY high holding since Feb ’05, where we advise full profit taking on all euro long positions. On the downside, a mild shake should lead to a dip to 1.2760, while a major shake of the euro longs should lead to one last dip to 1.2560 to 1.2580 where we shall add to our strategic longs without stops.
USD/CHF: We may witness a correction to 1.2290, which we shall use to sell USD in preparation of the next dip to 1.2000, then 1.18. Tight traders may exit out on a break above 1.2325, while medium term traders may add to their shorts on rally to 1.2420/65, then more at 1.2560. Any break now below 1.2185 is seen accelerating the move to 1.2080, then 1.2010, holding since May ’06. But the objective of this move shall be either 1.1920, the low tested twice and holding since May/April 06 or the next support level of 1.1800.
USD/JPY: The pair keeps frustrating the short-USD traders and with BoJ keeping rates low and showing no signs of hiking them soon, the yen and the Swiss franc are expected to remain as funding currencies. Play the short term range of 113.45 to 116.70, with a view to go with the breaking side for a min. 150 points move, which on the upside would be 117.40 to 118.80 and on the downside, 112.20 to 111.40.
GBP/USD: Sterling surged after the BoE rate hike last week and with the Fed seen keeping rates on hold, is seen gaining ground against all major currencies because of its yield advantage. Against the dollar, use possible dips to 1.8970 to 1.8860 to build up long positions, or add to existing longs on break above 1.9145 for min. move to 1.9260, then our objective of 1.9420, where we shall exit out of our longs. We are also long cable against the CHF and JPY with objectives of 2.3440 and 220.50, where again we shall exit out of our longs.
Holiday Break: Please note that the next currency update will appear in the August 23 issue of the Financial Mirror, after our annual holiday break. We wish all our readers, happy and profitable summer holidays.
Disclaimer: The recommendations on this page are for indication purposes only and the Financial Mirror does not take any responsibility for investment action taken on the above. Always consult a professional before investing.
