The euro is headed for a test of $1.40 against the greenback, on the hope that European banks will be re-capitalized after taking a haircut on the PIIGS bonds. There still appears to be some confusion — I suspect deliberate — as to who will pay, with German Finance Minister Wolfgang Schaeuble suggesting that banks first attempt to raise money from investors. Given the current state of financial markets, private investment will be scarce and European taxpayers are likely to end up with sizable stakes in a number of banks. Expect resistance at $1.40 to be followed by another test of support at $1.30*.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
The pound is similarly headed for resistance at $1.60. Respect would signal another test of $1.53.
* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46
Canada’s Loonie and the Aussie dollar both benefited from a surge in commodity prices. Expect the CADUSD to find resistance at parity, followed by another test of support at $0.94.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
The Aussie will find resistance between $1.02 and the descending trendline. Respect is likely and would indicate another test of $0.94.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
The Aussie has formed a broad double bottom against its Kiwi counterpart. AUDNZD breakout above $1.28 would signal a primary advance to $1.32*.
* Target calculation: 1.28 + ( 1.28 – 1.24 ) = 1.32
Support is holding firm on the dollar-yen cross — with assistance no doubt from the BOJ. Expect a narrow range between 76 and 78.
The South African rand is testing support at R7.70 against the greenback, after penetrating its rising trendline. Probably because of all the visitors returning early from the Rugby World Cup. 🙂 Apparently they have invited the referee to run a series of clinics in South Africa on his novel interpretation of the forward-pass rule. I suggest that he decline — it could get violent. Failure of support would offer a target of R7.00*
* Target calculation: 7.70 – ( 8.40 – 7.70 ) = 7.00
