Thursday, September 24, 2009

NordMarkets Morning FX - September 24


The FOMC left rates unchanged, as widely expected, keeping policy accommodative with a mild upgrade to its economic assessment. One bank notes that the FOMC made a slight change by saying they will purchase "a total" of $1.25tln agency-MBS. In previous statements officials said they would buy "up to" $1.25tln in agency-MBS. Reversal off post FOMC high of $1.4845 saw rate ease to lows of $1.4728 into the close with early Asia continuing the demand for dollars, as system and macro accounts stopped themselves out. Euro-dollar eased to $1.4685, as dollar-yen pushed up to highs of Y91.63, with cable, Aussie and Kiwi tracking the early euro-dollar move. Move was short lived as Asian sovereign dollar supply emerged to take euro-dollar up to $1.4754. Rally met model supply that countered, then reversed the move as euro-yen came under pressure from Japanese investment house sales, with model supply also noted as market moved to risk aversion as Asian regional equity markets turned negative. Nikkei was positive but seen catching up after the three day gap. Ifo and G20 today's focus.

Euro-dollar rallied to $1.4845 post FOMC only to meet strong Asian sovereign supply, with the reversal back to $1.4728 seen as US stock markets turned from positive to negative. System and macro supply continued into early, pre-Tokyo, trade with sales taking rate on to extended lows of $1.4685. Rate reversed off lows, with Asian sovereign demand providing a lift to $1.4740 ahead of a short squeeze on to $1.4754 before model funds began to provide stronger supply, the rate easing to $1.4710 before edging back to $1.4730 into early European dealing. Offers seen placed between $1.4737/43 (61.8%/76.4% $1.4754/1.4710) a break above to allow for a move back to $1.4754. Offers noted to $1.4760 with stops above, which if triggered to take rate on to $1.4780/85 ahead of $1.4800/10. Demand noted back at $1.4710/00 (61.8%/76.4% $1.4685/1.4754). Asian traders report that an Asian sovereign was a noted buyer of euro-dollar, Aussie and sterling off lows, book balancing with Bank a noted buyer of dollars Wednesday. Other Asian sovereigns also noted showing demand interest into Europe.

Dollar-yen closed the US session mid-range around Y91.32 after notching highs at Y91.55 in the wake of the FOMC announcement, while euro-yen ended around Y134.55. Early Asian dealing saw the highs extended to Y91.63 in dollar-yen before an about-turn as a Japanese investment house stepped in to sell at and after the Tokyo fix. Euro-yen had also hit early highs at Y134.69 before a major US name sold the cross down, stops triggered through Y134.00 over the Tokyo lunch break, with the rate slipping to session lows at Y133.58 and struggling to bounce through the Asian afternoon. Dollar-yen meanwhile found a base at Y90.77 and remains heavy into European dealing. Japanese demand still said to reside around Y90.50, with significant barrier protection still rumoured into Y90.00. Exporter offers are back around Y91.80. Euro-yen trading back within the Ichimoku Cloud, the base of which is seen as key support now at Y132.86.

The euro has almost reached its 100% projection of the Q4 2008 rally and Sept 2008 peak at $1.4851/62, and now favours correction back to $1.4613/38, which is the 21-day moving average and the former resistance from June 3. The daily studies are already beginning to turn lower, with stochastics now bearishly crossed.

RES 4: $1.4982 2.0% moving average envelope
RES 3: $1.4968 Major high Nov 2007
RES 2: $1.4906/08 Daily Bollinger band top, High Aug 22 2008
RES 1: $1.4851/62 100% projection of the Q4 2008 rally, High 22 Sep

SUP 1: $1.4747 5-day moving average
SUP 2: $1.4611 Low 21 Sep
SUP 3: $1.4517/33 Low 14 Sept, Former resistance line from 3 June
SUP 4: $1.4500 21-day moving average

Dollar-yen is still unable to close above the Y91.75 level, which was the major low seen in July and failure to close above here is seen leaving focus on the downside to a projected 6-month channel base, which is now valued at Y89.52. Initial support is at Y90.12/21.

RES 4: Y94.74 200-day moving average
RES 3: Y93.96 50% retracement of Aug/Sep decline
RES 2: Y93.06 38.2% retracement of Aug/Sep decline
RES 1: Y92.27/55 21-day moving average, 76.4% of Y93.29-Y90.15

SUP 1: Y90.71 76.4% of Y90.15 to Y92.53
SUP 2: Y90.12/21 Lows Sept 11, 14, 16
SUP 3: Y89.60/67 Proj channel base, 50% proj of the Aug/Dec downmove
SUP 4: Y87.12 Major lows Dec/Jan

Cable is holding above the 5-day moving average at $1.6310 and whilst this underpins, the risk remains on short-covering as the hourly studies continue to point higher from oversold territory. Whilst the "gravestone" doji yesterday candlestick yesterday is a worry, the hammer reversal candlestick Mon and strong white candlestick Tues is bullish.

RES 4: $1.6740 High 11 Sep
RES 3: $1.6665 Resistance line from July 2008 high
RES 2: $1.6437/54 50.0% of $1.6740 to $1.6134, High 18 Sept
RES 1: $1.6387 21-day moving average

SUP 1: $1.6264 High 21 Sept
SUP 2: $1.6100/15 Base of the dly Bollinger band, Dbl-low from early Sep
SUP 3: $1.6033 Low 13 July
SUP 4: $1.5986 Low 8 July

It is a light data day in Europe Thursday, although there are speakers slated on the Continent and in the UK.

At 0700GMT, Bundesbank Vice-President Franz-Christoph Zeitler speaks on how banking regulation should change, in Frankfurt

The only data of note is the 0800GMT release of the Germany September IFO business sentiment index.

At 0830GMT, German Chancellor Angela Merkel and Finance Minister Peer Steinbrueck hold press conference ahead of the G20 summit, in Berlin. The summit starts in Pittsburgh USA later today.

The US has a full calendar of data and speakers to sit alongside the opening of the G20 summit.

At 1230GMT, the Jobless Claims data for the Sep 19 week is due. Claims are expected to rise 5,000 to 550,000 in the September 19 week.

At 1330GMT, US Treasury Assistant Secretary for Financial Stability Herbert Allison testifies before Senate Banking Committee on the Emergency Economic Stabilization Act in Washington.

At 1400GMT, Existing home sales data is released. Sales are expected to rise to a 5.35 million annual rate in August after jumping 7.2% in July. Homes sales remain very weak relative to a year ago, but a clear upward trend appears to be emerging.

Back to data at 1430GMT, with the release of EIA Natural Gas Stocks. Also at 1430GMT, Chicago Federal Reserve Bank President Charles Evans speaks on asset price exuberance and macroprudential regulation at the opening of the bank's International Banking Conference in Chicago.

At 1500GMT, Kansas City Fed Production data for September is released.

Back in Europe, at 1600GMT, France August newly registered jobseekers data is out.

Back to the speakers, and at 1700GMT, Christina Romer, chair of the White House Council of Economic Advisers, delivers keynote the address to the Chicago Fed's International Banking Conference in Chicago.

Also at 1700GMT, Bundesbank President Axel Weber is slated to speak on "The Future of Banking Regulation" in Frankfurt, while ECB Executive Board member Juergen Stark gives a speech on "The Language of Money", in Berlin

The day closes out at 2030GMT, when US 14-Sep Money Supply (M2) is released. However, there is likely to be a drip-feed of unscheduled comments from G20 delegates throughout the day.

Best Regards,


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