FX Thoughts - Morning I - 11-Jan-2010

EUR-USD @ 1.4519/21...Holding Long

R: 1.4522-48 / 1.4624-42 / 1.4671-81 S: 1.4420 / 1.4381-55 / 1.4296-58

The Euro has risen sharply after bad NFP numbers yesterday. In doing so, it seems to have now formed a new base for itself near 1.4355 which is likely to act as a strong Support going forward. Having risen sharply from a low of 1.4264 on Friday, it may rise further after some consolidation near 1.4430.

For the longer term, two possible scenarios emerge. Scenario 1: It takes Support at the long term channel, the lower band for which is at 1.4300. At the max, the 200-DMA (1.4258) may be tested and the pair may then rise towards the intermediate channel Resistance which is at 1.4835 this week. If so, the Max High and the Max Low for the week shall be 1.4835 and 1.4280 respectively. More practically, the 21-week MA (1.4647) should be the high that we would eye for this week if it continues to rise.

Scenario 2: The pair oscillates around the flat 100-week MA (1.4296). The extr eme bands being provided by the 21-week MA (1.4647) on the top and the 55-week MA (1.3970) at the bottom. A break below the 200-DMA may make the pair fall towards the 55-week MA (1.3960).

Among the two scenarios above, we would assign greater weightage to the first scenario and assume that the pair is headed upwards.

Holding: EUR 10K Long at 1.4355, TSL 1.4365 (up from 1.4265), TP Open

Limit Buy Order: Buy EUR 10K at 1.4430, SL 1.4340, TP Open

USD-CHF @ 1.0156/60...Bearish. Sell on rally

R: 1.0220 / 1.0250-70 / 1.0300 S: 1.0125-00 / 1.0070 / 1.0020-00

Swiss has fallen sharply and is now trading lower below 1.0200 thereby keeping up the overall downtrend intact. Support is seen in 1.0125-00 region which might be tested during the day if it continues to trade below 1.0200. Any sharp upmove is not looking likely now. However, a strong break above 1.0200 might see 1.0250-70 on the upside. As the broader picture continue to remain bearish, a rally towards 1.0250-70 could be taken as a good opportunity to take short position.

Limit Sell Order: Sell USD 10K at 1.0260, SL 1.0340, TP Open

GBP-USD @ 1.6089/92...200-DMA overhead

R: 1.6095 / 1.6183-6210 / 1.6277 S: 1.6057-29 / 1.5989-82 / 1.5946

The Cable is clinging on to the upward moving 200-DMA. On Friday after the US NFP, extreme volatility gripped the markets and the Cable first rose towards 1.6110 only to fall back towards 1.5957. It subsequenty rose thereafter and is trading higher now; attempting a retest of 200-DMA. If broken, a further rise is likely to make the pair rise towards the Resistance region 1.6183-6210. The 200-DMA is at 1.6210 and the Projected Max High is at 1.6210.

Overall Cable has been bearish over the last several weeks. A significant downside is likely to see the pair rest near the 55-week MA (1.5688) which may then be have to studied for a double top formation on the weekly candles.