By John Hardy
Research Analyst
Published: Jun. 23 2004, 05:59 GMT
EUR/USD survives test of support. Break above 1.2170 resistance now appears to be a formality.
JPY gives traders whiplash after weakening before a record trade surplus number from Japan brought buyers back to the table.
Note: I'm filling in temporarily for Mr. Robert Balan, who will return to this space on Monday, July 5. I will publish this column once daily in early European hours.
Market Commentary, June 23:
Yesterday was a real battlefield for the currency market, as the terrain around 1.2080 in EUR/USD was contested for almost 12 hours. With the rally back to resistance just under 1.2170 currently, we now have a clearer picture of the technical situation: support appears very strong and the rally looks set to continue, with theoretical resistance at 1.2170 not likely to hold the bulls back for very long. If treasuries cooperate by resuming their recent rally, this rally could run quickly to the upside target around 1.2350. Progress beyond that level is doubtful for now, as the market may become more and more cautious with every day we get closer to the key FOMC meeting next Wednesday.
A real head-scratcher was the JPY yesterday - and the sudden weakening of the JPY had me mentioning the "i-word" to a colleague (intervention). No confirmation on that, however. Anyway, a record trade surplus number was released overnight and showed continued strong demand from China. This pushed USD/JPY back to where it came from, and it appears that USD/JPY may finally be set for a solid break lower towards 107.
GBP was drubbed by the EUR yesterday after widespread discussion that housing prices in the UK are showing signs of softening (meaning future central hikes may come more slowly) and on Iran's seizure of UK vessels that were patrolling on the Iran/Iraq border. The BOE minutes will be released today, and this could provide one more spurt higher in EUR/GBP, but the meat of the rally in EUR/GBP is . GBP/USD will likely begin to play catch-up at some point today if we do see the expected weaker USD, and could zoom back higher towards the 1.8450 area top.
New Trades
Long EUR/USD - Buy at 1.2180 (a "buy the breakout" strategy) with a stop around 1.2110 and a target of 1.2330.
Short USD/JPY - Short above 108.50 with a stop at 109.40 or so and a target of 107.10
Long GBP/USD - Buy here (currently 1.8260) with a stop at 1..8195 and a target of 1.8400
Maintenance of Trading Strategies from :
Long EUR/USD - Pull stop up to 1.2110. Targeting 1.2330
Long EUR/GBP - Take profits around 0.6660 or pull stop up to at least 0.6605 and hold out for 0.6700.
Short USD/CHF - Our stop level of 1.2550 barely survived yesterday due to strength in EUR/CHF, but action since then looks promising - lower stop to 1.2490
Long AUD/USD - Pull stop up a bit to 0.6840. Still targeting 0.7050
Economic Data Today:
Bank of England Minutes at 08:30 GMT
Important Data this week:
Thursday: Current Account (NZ), Durable Goods (US)
Friday: CPI (Japan), IFO (Germany), Michigan Confidence (US), Retail Sales (Canada)
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