Having taken out the stops above 0.8040 the previous week in spiking up to 0.8065, the cross then spent last week chopping around just under 0.8000 before collapsing ahead of the Scottish vote, trading down to a low of 0.7810 and then bouncing,Â to close at 0.7875. With the vote now out of the way, interest rate differentials will again be the focus and thus it looks as though the cross will head lower as Cable outperforms, given the divergingÂ outlooks from the BOE and ECB. While we may consolidate for a session or two after the recent big moves, a break of the session low would head below 0.780 and on to the long term target of 0.7753 (July 2012 low), which ties in nicely with the base of the channel seen in the chart below. If we head below there, there is little to stop the cross from heading to there Oct 2010 low at 0.7693.
Rallies will see offers at 0.7900 then at 0.7945 (23.6% of 0.8399/0.7810), which if seen – doubtful – will be a sell opportunity.
The cross had a huge week in rallying sharply on the back of the general Yen weakness, to as high 141.21 on Friday, before collapsing to finish back below 140.00, but right on support at the 200 DMA. Further near term losses look possible and we could see a run towards 139.65 and possibly to 139.15. Although doubtful, back below 139.00 would suggest a run down to 138.50. Any decent dip though looks like a buying opportunity for an eventual return to last weekâ€™s highs and eventually beyond and on towards the April high at 142.46 and then to the March high at 143.78. Beyond there would take out the trend high at 145.68 (Dec 2013) and potentially to much higher . Patience required!
GbpJpy made EurJpy look positively static by comparison, and after spiking down to 169.33 (Sept 9) it has since taken off like a rocket, in running up to 180.70, as the Scottish poll result became clear, before collapsing to finish at 177.50 where the 200 Month MA is acting as a magnate. No complaints about volatility!!
We need to tread very carefully here, and we could see further dips that could potentially see a return towards Fibo support at 176.80, below which could see a run back towards the previous high (1 July) at 175.36.
As with the other Yen crosses, dips look like buying opportunities for an eventual run back to Fridaysâ€™ high and then on to 183.75 (50% of 251.09/116.83) and potentially a lot higher.
No lack of volatility here either! After basing at 1.7213 on 8 Sept, the cross has since soared, reaching 1.8475 on Friday before retreating to finish the week at 1.8240. The dailies point to further gains and if last weekâ€™s high can be taken out, we could be in for a run towards 1.8720 (76.4% of 1.9185/1.7213), although realistically the cross should quieten down dramatically now that the Scottish vote is out of the way.
The downside looks to have support at 1.81765 (200 DMA), which may act as a magnate, below which could see a return towards 1.8000, which if seen, would appear to beÂ a buy opportunity. Overall, trading short term positions and avoiding a medium term outlook appears to be the plan, so take it session by session, but with an overall bias to the topside.