Med-term traders trade the range successfully

EUR USD (1.2640)
The single currency was not in a position to deliver any spectacular move yesterday. Instead, it just hovered above the $1.26 level for most of the day. With hardly any economic releases and almost no fresh news, market participants found themselves just facing old stories again. With the dollar initially a tad stronger in the European session yesterday, some simply argued that the gains could be ascribed to short covering ahead of US data release and that the market over-reacted to the Bernanke statement. Others were talking about a settlement in the Middle East in the light of the Rice visit to the region. The latter does not make sense at all in the light of the ‘save -haven’ argument – it means the ‘prospect’ of peace would encourage dollar buying while the intensified conflict would do exactly the same.

In addition, with the euro holding above the $1.26 level, ‘semi official’ buying was also sighted as providing the single currency with support. Nevertheless, our latest EUR-Sentiment survey showed that the medium-term market participants chased the single currency higher over last week. Some bought around the lows and these traders are now also sitting on some profits. For the moment we can expect to see more range trading from this segment of the market. In addition, they would need a significant move outside the range before they will act and it is hard to imagine that they would sell before $1.28 or bail out before the mid $1.23 level.

We still maintain our bullish outlook for the euro for target 1.2845 (marginally adjusted). Intermediate resistance is visible at 1.2765. As mentioned already yesterday, the positive orientation can only stand small corrections and therefore 1.2610 serves as the extremely tight limit.

USD JPY (116.70)
Yesterday’s difficulty with information fatigue also appeared here as traders continued to talk about Friday’s expected revaluation of the yuan, which did not happen and the unwinding of long yen positions therafter, which is old news by now. Of note is that there is still a strong perception in the market that a yuan revaluation would boost the yen, however, there are also those who look at what happened when the yuan was initially revalued and reckon that the impact will be short-lived. The dollar moved beyond our 116.70 tight limit (practically the level where we previously opened the position) and must therefore be treated as neutral. Of note is that support improved at 115.50/60, where we would try a bullish strategy again with a tight limit. Critical demand stands at 114.20. Overhead, we expect supply points at 117.50 and thereafter at 118.30.

EUR JPY (147.45)
The single currency is still in a position to push ahead to even loftier levels than what we have seen this far. The next upside attempt could reach the 148.30 level after which it should head as high as 149.25. To the downside, we envisage support in the 146.50/70 zone, where we would opt for a bullish strategy again with a tight limit. As mentioned yesterday, the second resistance will then kick in as a target. For today, we reckon with critical support at 145.45.

EUR GBP (0.6840)
Our current target remains 0.6730. Nothing much has changed for the cross and it just continued its sluggish crawl to the downside. Any subsequent move down can count on support at 0.6805. On a bounce our 0.6860 risk-limit to the bearish orientation should under no circumstances be violated.

GBP USD (1.8500)
Although the market is still geared for a BoE rate hike in August, the Pound slipped below our tight 1.8470 limit this morning (which also basically represented the level where we opened the position). We re-adjusted the position to neutral thereafter. On the upside, we expect supply lurking at 1.8630/40. Only a break beyond the latter would signal further gains (1.8775). For the time being we anticipate demand at 1.8440 and 1.8325.

AUD USD (0.7560)
The Aussie shrugged of the fall in the Australian business index this morning and is well underway to 0.7570, which represents the best near-term resistance for the moment. Beyond there, we can expect to see gains to 0.7650. The latter could even be treated as a target while 0.7550 is not undercut after that. In the meanwhile the closest support is visible at 0.7520.