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EUR/USD. Holding above 1.25

EUR/USD (1.2582) is up overnight, holding onto gains from the sharp rally last Thursday. Some ascribed that move to a huge short EUR / long gold position unwind, while others indicated that it derived from an increased focus on the downside risks for the US economy. Still others noted that the Euro Zone dodged bullets last week with Spain issuing debt and the ECB’s 1yr loan facility expiring without incident. Bloomberg has published a feature article this morning highlighting various bank strategists who believe that EUR/USD could still trade towards 1.15 this year as debt problems and austerity weigh on the European currency.

Technicals:

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Trend: Daily higher; Weekly higher.
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Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.
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Support / Resistance Levels: Support for EUR/USD lies at 1.25 (psychological), 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2612 (Jul2 high), 1.2672 (May 21 high), 1.3094 (May10 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).

Positioning:

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The CFTC, EUR, non-commercial, net position (-66K) deteriorated slightly, in keeping with the price action through last Tuesday.
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The risk reversal (3m, 25delta) ticked higher on spot’s hold above 1.25.
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Implied Vol (3m) slipped overnight on the back of spot’s recent gains.

Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 5yr yield spread (positive), the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).

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Daily Technical Strategist
GBPUSD

GBPUSD: Bullish Momentum To Target The 1.5308 Level.

GBPUSD: As a sharp rally saw the pair wiping out its corrective weakness from the 1.5127 level to close higher at 1.5161 on Thursday, risk of further strength is now set to extend towards the 1.5308 level, its May’10 high. This price action has resumed GBP’s nearer term uptrend started from its 2010 low at 1.4226 and paved the way for a run to the upside. Beyond the 1.5308 level will call for further strength towards its April 30’10 high/falling trendline at 1.5365/89 and then its April 15’10 high at 1.5521. Its daily RSI has turned higher supporting this view. Alternatively, on any pullback from the current price levels, we expect the 1.5127 level to serve as the initial support where a reversal of roles is expected to turn the pair higher again. Below there if seen will activate further weakness towards the 1.4872 level, its July 01’10 low followed by the 1.4685 level, its Jun 22’10 high.

Forex: GBP/USD reaches 1.5200 level
GBP/USD continues to trade higher on Friday, after a recent bullish burst lifted the British currency around 30 points. The upleg broke through 1.5200 area, thus setting a new 2-month high at 1.5213 zone. Current price stays at 1.5210.

The upside acceleration seems far from over as further upside exposure may be in the brewing. It took nearly 12 hours since the Asian session first opened, but after 2-failed attempts, the third extra push-up given in Europe materialized the break of an important hurdle at 1.5200

“Unfortunately the pair couldn't break below 1.4850 support and the overall uptrend was renewed, marking a new high at 1.5199. Further appreciation is to be expected, towards 1.5345 and probably 1.5524 resistance. Initial support is seen around 1.51+, but crucial for the uptrend is 1.5000 area”: said Stoyan Mihaylov at Delta Stocks.

EUR/USD
The pair quickly gained strength this European morning, currently trading at 1.2295. We expect some down correction now, but see the overall bidding mood intact for today, leading to the 1.2360 mark.

GBP/USD
Continuing its downtrend in early European trading, cable is priced right now at 1.4930 in a smaller up correction. We expect the market to hold above the 1.4900 mark today and reckon with prices around 1.4980 later in the day.

USD/CHF
In an undecisive market this European morning, the dollar is currently trading at 1.0702 against the Swiss franc. We see a sideways trend for today, between 1.0750 and 1.0700.

USD/JPY
After reaching lows near the 88.10 mark against the yen in Asian trading hours today, the dollar recovered slightly to now 88.35 in the European morning. We see an uptrend emerging today, leading to levels around 88.60.

Daily technical outlook
EURUSD

Trading strategy: small short at 1.2290, stop at 1.2360 (0.5% risk), 1st objective at 1.2230, 2nd objective at 1.2100

Support at 1.2150 came under pressure yesterday as the euro continued to pullback after breaking below 1.2250 which provided support last week. Short-term sentiment remains slightly bullish as the median retracement of 1.1875-1.2465 is still intact – around 1.2170. Not far below 1.2150 comes 1.2100 which is the next support to watch – formed by the 61.8% of mentioned up leg. More downside action is likely – as long as upside will be capped by 1.2300. Above 1.2300 – uptrend resumes. Current quote is 1.2220 @05:55 GMT

Support: 1.2150, 1.2100 and 1.2000
Resistance: 1.2250, 1.2300, 1.2360 and 1.2400
Market sentiment: long term – bearish, medium term – bearish, short term – slightly bullish, intra-day – bearish