At a glance: What crisis?
Despite rather mixed figures and the ongoing struggle in the EUR crisis, risk markets and the EUR kept on trading higher, but are now facing much stronger headwinds in the technical picture. That said the S&P 500 has already reached its main resistance barrier between 1258 and 1271/75 (pivot/daily n eckline/200 day MA) and EUR/USD faces massive resistance which stretches all the way from 1.3969 (pivot) via 1.4045/74/95 (50 %/pivot/200 day MA) to 1.4219 (int. 76.4 %). These resistance zones look massive and given the preceding strong gains and the current environment we are in it would be very surprising if markets would have enough power left to push through. The same applies for Cable where the market has performed a classical re-test of the weekly breakout line at 1.6015 and as long as the latter is not taken out, the risk of running into some kind of setback if not the resumption of the broader bear trend remains fairly high. EUR/JPY is another candidate facing the same problem as the latest recovery failed to clear the weekly breakout line at 107.89, which leaves the downside wide open for a potential test of the 2001 low at 99.85. Only a break above 107.89 and ultimately above 108.82 (int. 38.2 %) would indicate that a bottom might be in place. As for EUR/AUD the focus is now on the key-T-junction at 1.3249 (int. 76.4 %). The defense of it would leave the upside wide open for a test of the last tops at 1.4264 & 1.4342 whereas a decisive break below would challenge a 50 % retracement on bigger scale at 1.2858.
° Short 2 units EUR/HUF from 298.65, targets 271 & 265, stop at 308
° Short 2 units EUR/MXN from 18.4990, target 15.2800, stop at 19.5000
° Long 4 units USD/CZK from avg. 17.255, target 19.02, stop at 16.50
° Short 4 units EUR/INR from avg. 64.90, targets 60.50 & 58.50, stop at 69.85
° Short 2 units PLN/HUF from avg. 68.604, target 64.00, stop at 69.15
EUR/USD daily – In thin air
° Having basically reached a massive resistance zone between 1.3969 (pivot) 1.4045/74/95 (50 %/pivot/200 day MA) and 1.4219 (int. 76.4 %) after an impressive rally from 1.3146, it can be doubted whether the market has enough momentum left to also push through this resistance zone.
° Given the earlier break below 1.3350 (int. 76.4 %), we expect a resumption of the downtrend.
GBP/USD daily – A break above 1.6015 is required to gain limited upside to 1.6301
° The market has so far performed a classical re-test of the daily breakout line at 1.6015, which normally attracts sellers to re-enter a fresh short position.
° Only a break above the latter would weaken the prevailing bear-trend even further, but in order to neutralize it completely it would most likely take a break above 1.6301 (int. 76.4 %).
EUR/GBP daily – Unchanged! In no man’s land between 0.8802 and 0.8593/87
° The failure to clear 0.8802 (int. 76.4 %) last week in combination with the break below the last intra-day low at 0.8688 gave the market a slight negative spin, but in order to really pick up stronger down momentum it would certainly take an additional break below 0.8593/87 (minor 76.4 %/pivot).
° In between the latter and 0.8802 (int. 76.4 %), this market remains pretty much in no man’s land and only a breakout of this range would most likely determine market directions over the coming weeks.
EUR/AUD daily – Make or break at 1.3249!
° The market has basically reached the decisive T-junction at 1.3249 (int. 76.4 %) where the bulls and bears will have to fight it out.
° But given the strong rally we have already seen on the risk side and the now rising setback risk, chances of 1.3249 being defended are actually not too bad what would keep the door open for a minimum rally to 1.3776 and 1.3896 (minor 61.8/76.4 %).
° Only a break below 1.3249 and 1.3050 (daily trend) would resume the broader downtrend.
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J.P.Morgan
Global FX Strategy