EUR: Do as little as possible

Fri, Mar 14 2008, 07:46 GMT
by Nicole Elliott

Mizuho Corporate Bank

EUR

Comment: Another day, another new record high at 1.5652, and the US authorities increasingly powerless and clueless. The Euro is of course overbought but desperate times mean dramatic values and moves. At-the-money implied volatility should increase to 11.75%.

Strategy: Do as little as possible. If you really want to possibly attempt very, very small longs on a drop to 1.5525 but only if prepared to add to 1.5400; stop below 1.5250. Short term target 1.5750.

EUR/JPY

Comment: Fairly sharp intra-day moves as this currency pair looks for direction. Note that the cross is not oversold and that implied volatility should remain high and possibly spike to 20.00%. Watch other Yen crosses too for signs of topping, noting that some are testing key downside support (CAD/JPY and SGD/JPY).

Strategy: Sell at 156.75, adding to 158.00; stop above 159.50. Short term target 155.50, then 154.00 and later an awful lot lower.

GBP

Comment: Retracing almost 61% of the losses from November to January and we continue to favour a squeeze up to 2.0500/2.0600.

Strategy: Buy at 2.0300, adding to 2.0150; stop below 1.9990. Add to longs on a sustained break above 2.0400 for 2.0500/2.0600.

JPY

Comment: Consolidating quite happily around 100.00, the lowest since November 1995, and below the 101.25 and 101.65 lows of 1999 and 2005. Bearish momentum is stronger than it has been in years and who cares that the US dollar is being trashed. And even if they did, are they able to do anything about it. At-the-money implied volatility should soar above 20.00%. A weekly close below 100.00 would be significant and should send things sliding again next week.

Strategy: Stand aside if possible. For those who have to: sell at 100.50, adding to 101.00; stop above 101.55. Short term target 99.77/99.50, then 97.00, maybe 96.00.