At a glance:
The risk-off trade is extending today as Greek news once again takes the air out of the positive sentiment. The impulsive, trending bias to the reversal highlights the short term risks of further retracement to the October trends as momentum extremes still need to be unwound.
Moreover, the break of several key USD resistance levels is consistent with this short term view.
In turn, the next levels of key resistance are in focus today. Starting with the DXY, the break of the 77.30/77.55 resistance area and mid-October highs suggest a deeper retracement initially into the 77.85/78.00 zone. Moreover, EUR/USD has pulled back into the 1.3655/00 area but the sharp reversal from the 1.4250 area suggests a higher risk that a deeper retracement is underway.
AUD/USD is taking a hit today following the RBA cut as today’s break of the key 1.05 support area suggests additional weakness. The next key test enters at the 1.0230/00 support area which includes the 38.2% retracement of the October rally and the violated channel from the August high. While some pause should develop from here, note that strength back above the 1.05 area is necessary to avert the potential for a deeper pullback.
As such, the pullback cross JPY seems likely to extend as well and this follows the test and hold of several key resistance levels. EUR/JPY has reversed from the important 112.00/112.70 area which includes the late-August high, the 200-day moving average as well as the 50% retracement of the decline from the April high. And with the break of the 108.15 support level, the risks point to a deeper pullback into the 105/104.75 area. Also, with AUD/JPY reversing from the key 84.00/84.90 zone (August breakdown along with the downtrendline from the late-April high), breaks of the 80 support area would imply a deeper pullback underway. While USD/JPY held the important 79.55/80.25 resistance zone, nearby support at 77.65 is still holding. Note that breaks here would confirm a deeper pullback underway.
Trade Strategies:
° Short 2 units EUR/USD from 1.3938 risking 1.4380 targeting 1.2650/1.1900.
° Short 2 units EUR/MXN from 18.4990 risking 19.50 targeting 15.2800.
° Long 4 units USD/CZK from 17.255 avg risking 16.50 targeting 19.02.
° Short 4 units EUR/INR from 64.90 risking 71.50 targeting 60.50/58.50.
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http://www.easyforexnews.net/wp-content/uploads/2011/11/JPM_FX-Techs_2011-11-01_712669.pdf
J.P.Morgan
Global FX Strategy