[Dan]

EUR/USD – The heavy tone of price action last week delivered the anticipated quick slide to the 1.40 area that some traders thought likely but despite price breaking under key short term support points (trend, moving averages and even the neckline of a possible H&S top), the downside follow-through selling interest was once again lacking. If the August pattern follows that of June, we can look for the EUR to remain choppy but retain a grinding bid. Given the lack of respect the market is showing for trend-line breaks etc. at present, the broader pattern of price movement tells the tale of the tape. Higher highs and higher lows suggest the EUR remains in an uptrend; weekly charts show an outside range week forming this week – a weekly close above 1.4185 is bullish. EURO Bullish view while above 1.40.

USD/JPY – The weak tone in this market we have been expecting duly unfolded over the early part of this week. The USD even slid below 94.50, which some thought would lead to a sharper sell off; instead, however, USD/JPY steadied Thursday and rallied Friday – forming a bullish outside range day in the process today (providing the daily close is above 94.20). With spot back to the mid 94 area and testing both daily and weekly “cloud” chart resistance at 94.55 and 94.78 respectively; the risk of a fairly big squeeze on the long JPY positions that have built up over the past two weeks looks pretty high. The key short term resistance stands at 95.50; bigger picture, a rather juicy-looking potential inverse H&S might be forming – the neckline comes in at 97.54 currently.

EUR/CHF – The cross has found good support right on the 200-day MA today, as it did in early July, and while the EUR has rallied only a little from the intraday lows and there is not an obvious buy signal on the daily chart. Support in the 1.51 area should hold. Short term charts are modestly bullish at least and we would expect EUR/CHF gains to pick up above 1.5200/05; given the noted SNB interest in keeping the CHF soft and the risk of more intervention, current levels provide a relatively good risk/reward scenario for longs; good demand between 1.5100/35 is expected.

NZD/USD – The Kiwi remains in a strong position from a technical point of view; price action is positive – the market consolidated in June/July, broke higher and is sustaining the break out in August. Oscillator signals suggest that trend momentum is bullish from a short, medium and long term point of view, which usually means limited pullbacks and a steady bid tone at least. The only thing missing here is a new high. Good support is expected for the Kiwi on dips to the low/mid 0.67s in the short term. Below 0.6680/00 will suggest this is wrong, however, and open up the downside for a test of bull channel support at 0.6552.