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FX Daily Hotline 
17 October 2014     By C Dichio, Analyst

Chart of the day: Sterling 'bear trap' v Yen

 

A number of currencies have bounced against the Japanese Yen.  The British Pound, for instance, has recorded a 0.8% gain for Thursday's session.  In fact, the UK unit had already encountered intraday support at Y168.026 the previous day; close to the March floor at Y167.78.  The rebound has led to a failed break under the April to September platform near Y170 giving rise to 'bear trap' hopes for a further recovery over the short term, especially as the RSI indicator remains near oversold levels, possibly towards the Y175 region.

 

Daily Comment:

 

The 'Gainers & Losers' sections below bear testament to the generally firm tone of the British Pound yesterday.  Brazil's Real appeared a second time on the 'Losers' column, as it retraced back towards this year's floor area at £0.2467.  If that platform yields, the next important chart support is at the 2008 spiked low at £0.2259. 

Sterling has suffered a 'bull trap' reaction against the Swiss Franc recently.  This followed the failed break over the July high at SF1.5434.  Having become oversold, that decline is now finding support at the September floor at SF1.4969; close to the 200-day moving average.  A sustained breach of that level would be needed to offset current scope for some further recovery over the near term.

The British currency has similarly bounced versus the New Zealand Dollar.  Gaining 0.8% as well, former resistance in the NZ$2.00 region has converted into support, as Sterling tries to reverse the pullback from the overbought September peak.

It has managed to reverse up versus the South African Rand, to extend the broad trading band, which has been in force throughout the year (see 'Gainers' for the chart).

Unfortunately, since we are short, the Euro has also reversed up versus the SA Rand.  Finding support near R14, the single European currency has rebounded to challenge the downtrend channel from this year's early pinnacle around R15.50.  We watch to close the short in the event of a sustained break of last month's ceiling (R14.3743).

The Euro has renewed its short-term advance against the Australian Dollar.  A long trade is opened on the break over A$1.46 (see hotline for 13 October, Chart of the Day).  The next target is the sideways area along A$1.50, with the possibility of A$1.55 after that.  The stop is placed at A$1.42 for now.

Gainers / Losers
Top 5 Gains.
SymbolStockClose% Change
LACILatin America Dollar Index87.51+2.0%
GBPAUDGBP/Australian Dollar1.8372+1.3%
GBPJPYGBP/Japanese Yen171.072+0.8%
GBPNZDGBP/New Zealand Dollar2.0226+0.8%
GBPZARGBP/South African Rand17.8868+0.8%
Top 5 Losses.
SymbolStockClose% Change
BRLGBPBrazilian Real/Pound Sterling0.2514-1.0%
AUDCADAustralian Dollar/Canadian Dollar0.9859-0.8%
TWI ADSPAustralian Dollar Index133.63-0.7%
AUDEURAustralian Dollar/Euro0.6836-0.6%
EURGBPEuro/Pounds Sterling0.7962-0.6%
    
The FX Model Portfolio
Foreign Exchange Model Portfolio Longs
Date Stock Code Type Open Price Current Price % P&L Stop Comment
14 Oct 2014 US$/Norwegian Krone NOK Long 6.5782 6.5446 -0.51% 6.27
14 Oct 2014 US$/Canadian Dollar CAD Long 1.1279 1.1258 -0.19% 1.085
16 Oct 2014 Euro/Australian Dollar EURAUD Long 1.46 1.4628 +0.19% 1.42
Foreign Exchange Model Portfolio Shorts
Date Stock Code Type Open Price Current Price % P&L Stop Comment
4 Sep 2014 Euro/South African Rand EURZAR Short 13.8896 14.2394 -2.52% 14.4
14 Oct 2014 Canadian Dollar/Mexican Peso CADMXN Short 11.9013 12.0433 -1.19% 12.15
  • A long is opened in Euro v A$.

 

Daily Analysis

Symbol Name Comment Close 1 day Support Resistance
DXYUS Dollar IndexRanging between the overbought early-Oct high and 50-day MA.84.955-0.2% 83.86488.708/86.746
EUREuro/US DollarHolds the recovery from oversold.1.2809-0.2% 1.2466/1.25011.2995
GBPUSDBritish Pound/US DollarPauses the downtrend near the Nov 2013 floor.1.6087+0.4% 1.5429/1.58551.6416/1.627
CADUS$/Canadian DollarUptrend finds intraday resistance at 1.1385. Drops back under the early-2014 high (1.1279).1.1258+0.0% 1.0887/1.10721.1725
JPYUS$/Japanese YenRetreat from the overbought 'Peak' KDR of 1 Oct; near the mid-2008 ceiling slows.106.33+0.4% 103.56110.66/110.09
ZARUS$/South African RandPullback from overbought and the early-2014 peak halts. Develops support at the 50-day MA.11.1174+0.4% 11.166/10.962811.8723/11.3909
KRWSouth Korean Won per 1 US DollarOverbought rally struggles beneath this year's earlier highs.1061.6-0.1% 1031.35/1038.41089.71/1082.9/1074.75
CHFUS$/Swiss FrancExtends the correction from overbought to the 50-day MA.0.9425+0.3% 0.9126/0.9301/0.9469?0.9839/0.9751
EURGBPEuro/Pounds SterlingOverbought recovery from oversold and the 2012 low (0.7755) finds resistance at the Sept high; near the 200-day MA.0.7962-0.6% 0.7694/0.77550.8153/0.8066
EURJPYEuro/Japanese YenS-t decline finds firm intraday support at 134.14; near the 20 Nov low.136.2+0.2% 131.22/134.11141.23/137.94
EURCHFEuro/Swiss FrancFailed break above the small base area. 'Bull trap' potential towards 1.205 region.1.2073+0.0% 1.203/1.20451.2178/1.214
GBPJPYGBP/Japanese YenOversold s-t fall finds support at 168.026; near the Mar floor (167.78). Failed break under the Apr-Sept floor near 170.171.072+0.8% 163.889/167.78197.453/180.715
GBPCHFGBP/Swiss FrancOversold 'bull trap' decline bounces from Sept support.1.5164+0.7% 1.4766/1.49691.5692/1.5536
CHFJPYSfr/Japanese YenCorrection from overbought finds firm intraday support at 111.231. Failed break under the Feb low (111.7).112.818+0.1% 108.883117.01/113.763
AUDJPYAustralian Dollar/Japanese YenExtends the s-t fall to intraday support at 91.764. RSI low.93.117-0.4% 91.08597.929/96.033
AUDNZDAustralian Dollar/New Zealand DollarRetreats from the early-Sept high towards the multi-month base.1.1008-0.4% 1.0624/1.09191.1313/1.1296
AUDAustralian Dollar/US DollarOversold decline yields to ranging.0.8744-0.1% 0.8316/0.86430.9112/0.8899


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