Sterling broke through the 1.8600 critical support level and the dollar was broadly higher. Read our chart analysis.
EUR/USD: The market continues to believe in a US soft landing and this is providing the USD with support. Even if headline data from the US is on the weak side, the market looks for bright spots for an excuse to push the USD higher. This week we see the release of the FOMC minutes followed by retail sales and UoM sentiment, which are all expected to be USD-supportive. Also importantly, with the speculative positions heavily long euro, we expect a USD push higher to trigger the stops, which should be lined up below break of 1.2500. So with the 1.2615 already touched as the Monday/Tuesday high, we expect a minimum test of 1.2515, to be followed by a test of 1.2485 to 1.2460, where we shall take profit on euro shorts. A break of the July 06 low of 1.2450 should trigger more euro losses to 1.2385, then 1.2335. On the upside, the 1.2655/70 resistance should cap euro up-moves with more resistance seen at 1.2710 to 1.2740.
USD/CHF: The break above the double top formation of 1.2640 has opened the way for a minimum move to our new target of 1.2760-80 where we intend to book our profits on longs. Watch the price action at 1.2760-80. If the USD cruises past this point without a fight, then load up more long USD’s for the next objective of 1.2970 to 1.3060, the previous high since April ’06. Alternatively, if the 1.2760-80 caps the move, then brace for a correction back to 1.2500 area.
USD/JPY: The USD remains well supported even with the market trying to gradually turn away from the North Korean issue. The break above 119.40 is significant since it is also the high since Jan 06, which if sustained on a NY closing basis will open the way for additional USD gains to 120.30, then target 120.70. More resistance is seen between 121.10-40, the all-time high reached in November 05.
GBP/USD: The break below 1.8600, the previous low since September 06 is seen opening the way for a minimum move to 1.8535 to 1.8510 where we shall take profit on our short GBP positions. Watch the performance of cable at 1.8510, if it goes without a fight, then sell sterling again for new objective of 1.8385, but be prepared for violent upmoves possibly to the previous breakout level of 1.8600.
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.
