Wednesday August 11, 2004 - 17:57:25 GMT
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Yen Shorts Spillover
The dollar traded mixed as some “mixed signals” from Saudi Arabia about the future of oil prices sent EUR/JPY and USD/JPY for a nasty spill. EUR/JPY fell from 135.85 to 135.15 while USD/JPY dropped from 111.22 to 1110.66 as traders rushed to cover short yen positions put on over the past few days during the high rise in gasoline prices. Meanwhile, EUR/USD traded to its post non-Farm Payroll low of last Friday (1.2195) down from 1.2240 and GBP/USD dove from 1.8305 to 1.8245. There was a brief reprieve of yen purchases once traders reassessed the Saudi situation (110.85, 135.50) after all it is unlikely that one country can single handedly solve the problem of higher energy costs. But key technical breaks at 110.90 and 135.30 have known put pressure on what was once a “no brainer” type position (short yen in light of higher oil). We will keep close watch on the key aforementioned levels.
TECHNICALLY SPEAKING We see solid support at old resistances (1.2130-20) in EUR/USD. The topside shows minor resistance at some old lows (1.2270) and key medium term congestion at 1.2340. The 1.2240 intraday high could serve as a pivot for the next 50 pip move.
GAIN AN EDGE We will sell EUR/USD at 1.2265-75 with a 1.23 stop and 1.2185 limit.
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