Daily Majors Analysis 25.01

25 Jan 2008

EUR/USD

Comment: Rallying sooner and more strongly than we had hoped and looks set to test trendline resistance of the large ‘triangle’ consolidation pattern. A weekly close above 1.4800 should add considerable bullish momentum taking the Euro to new record highs in February.

Strategy: Buy at 1.4760, adding to 1.4600; stop below 1.4550. Add to longs on a sustained break above 1.4800 for 1.4850 and then 1.4900.

EUR/JPY

Comment: Massive price swings as the 152.00 area is so very pivotal. The weekly candle looks like ending up as a massive ‘spike low’ suggesting that we shall consolidate within the massive ‘triangle’ formation for another few weeks.

Strategy: Possibly attempt tiny shorts at 158.70; stop above 160.00. Short term target 156.00, then 152.00.

GBP/USD

Comment: A bit more like it as we squeeze higher from the ‘downward-sloping wedge’ but a pity it did not manage a daily close above 1.9800. Seeing as Cable is still 13 cents below last year’s high while other currencies are at that level already, the line of least resistance would appear to be to buy Cable or sell

Strategy: Buy at 1.9800, adding to 1.9655; stop below 1.9450. Add to longs above 1.9990 for 2.0100 short term.

USD/JPY

Comment: This week looks set to end up as a ‘hammer’ formation with a massive ‘spike low’ just below pivotal support at 105.00 (104.95) and the lowest price since May 2005. Stock indices have something similar suggesting that the unravelling of the ‘carry trade’ in its many guises will take a breather for the next month or two. For today and allow for a series of random moves roughly between 106.50 and 108.00. All rallies towards 109.00, and probably no higher than 110.00, are seen as medium term selling opportunities for an eventual break below 105.00.

Strategy: Possibly attempt small shorts at 107.50; stop above 108.15. Cover shorts ahead of below 105.50.