At a glance: Too calm to be true
Apart from slightly increased volatility ahead of the decisive meetings and summits, the investment community seems to be little concerned as risk markets keep on defending their positive bias and the EUR appears to be undisturbed on its recovery path. This kind of carelessness has however regularly provided the right ground for really dynamic breakouts in the past so that the current calm looks to be highly treacherous. That said we keep a fairly low profile until the markets provide strong signals to increase our exposure again. On the risk side we’d certainly receive a strong signal in terms of having launched a much broader down-consolidation once the leading S & P 500 would break below key-support at 1385/81/79 (daily trends/minor 38.2 %). This would be equivalent to a break below keysupport between 1.2492 and 1.2445/07 (int. 38.2 % on 2 scales/daily trend channel) in EUR/USD or to breaks below 1.5737/27 (C=A/200 DMA) in Cable and below 122.16 (daily trend) in GBP/JPY. As for Commodity FX we still see additional downside as long as AUD/USD doesn’t break above 1.0357/1.0400 (minor 38.2 %/pivot) and NZD/USD remains capped between 0.8067 (daily breakout line) and 0.8138 (minor 76.4 %). The fact that USD/SEK defended key-support at 6.5846 (minor 76.4 %) in Friday’s slump supports our view that a broader bottom is forming, which however requires a decisive hourly close above 6.7523 (int. 38.2 %, using a 0.5 % filter) to confirm a bottom in place and in order to provide a clean buysignal. A break above 7.3507/7.3676 (last intra-day top/daily trend) in EUR/NOK would also call for a much broader recovery to unfold.
Click here to read the full report: FX Tech
J.P.Morgan