NordMarkets Morning FX - September 30

MORNING FX
BRIEFING
The Aussie was the big mover in Asian trade as stronger-than-expected Australian retail sales data cemented expectations of an RBA rate hike before year-end. Traders said there was already a natural bid tone as month-end real-money hedging went through, with the data release then giving the rate another 60-point kick higher to a fresh 2009 high at $0.8805. Elsewhere, talk of sizeable half-year-end fixing demand of foreign currencies proved to be inaccurate as dollar-yen was sold heavily into the fix after hitting early highs at Y90.42. Euro-yen had traded up to Y132.04 before giving back over 100-points to trade on a Y130 handle into early Europe, as dollar-yen comes back to Y89.55. Euro-dollar meanwhile regained a foothold above $1.4600 on the back of the Aussie move, rallying to $1.4633 in Asia, with early Europe taking the rate to $1.4640. Sterling continued its recovery in the wake of Tuesday's strong UK CBI retail sales data and talk that the BoE would not be lowering the reserve rate any time soon. Cable moved to $1.6035 in Asia and has extended the bounce to $1.6049 in recent trade.

EURO
Euro-dollar closed the US session around $1.4585, Asian trade then seeing a bid tone emerge as Aussie rallied strongly on better retail sales data. Traders reported stops being hit on the break back above $1.4600, with little in the way of supply to counter the move. Gains extended to $1.4633, with euro-dollar remaining buoyed on a $1.46 handle through the balance of the Asian day. Early European dealing then provided the added push for a move to $1.4644, the rate currently trading back around $1.4625. Techs are noting the rate failed to close below the 21-day moving average last night, today seen as pivotal at $1.4580. Bids said to be forming on the downside at $1.4530, said to be semi-official in nature. Topside orderboards said to be pretty mixed with no clear bias. Attention today now centred around the ECB one-year liquidity tender, due to close at 0900GMT.

YEN
Dollar-yen closed a quiet US afternoon session around Y90.10, while euro-yen ended firm around Y131.43. Talk of strong demand for foreign currencies versus the yen at the half year-end fix circulated into the Asian session, pushing dollar-yen up to Y90.42 before offers began to stack up from exporters. Euro-yen followed a similar path, trading up to Y132.04 before fixing sales knocked the yen pairs back. Traders noted a Japanese agricultural bank as a decent seller, local real-money accounts also active as dollar-yen slipped back below Y90.00. Heavier tone prevailed into the Tokyo afternoon as dollar-yen retreated to Y89.63, early Europe then knocking the pair lower still to Y89.55 as euro-yen gave back over 100-points from the overnight highs to lows under Y131.00. Bids noted into Y89.50 with some stop interest below. On the topside, talk now of large stops from CTA and model accounts on a break of Y90.50/55. Euro-yen demand comes in around Y130.70, key support still seen as the 200-day moving average at Y129.60.

EURUSD - TECHNICALS
Turning to the technical picture, the euro is still looking corrective with a weak daily stochastic study and a negative break for momentum. Near-term the 21-day moving average is lending support at $1.4580 with initial resistance at the 5-DMA at $1.4645. Outside of there, support/resistance is $1.4526/$1.4802.

RES 4: $1.4908 High Aug 22 2008, Daily Bollinger band top
RES 3: $1.4851/62 100% projection of the Q4 2008 rally, High 22 Sep 2008
RES 2: $1.4802 High 24 Sept
RES 1: $1.4645 5-day moving average

CURRENT LEVEL: $1.4633

SUP 1: $1.4580 21-DMA, Low 28 Sept
SUP 2: $1.4526 Low 29 Sep
SUP 3: $1.4447 High 5 Aug
SUP 4: $1.4330 Low 8 Sept

GBPUSD - TECHNICALS
Cable has recovered into the Bollinger band and also overtaken the 5-DMA, which turn support at $1.5940 and $1.5820. The daily stochastic remains soft, although both it and momentum are attempting to turn off lows. There is a congestion level at $1.6085 ahead of former Sep lows at$1.6115/34. While $1.5770 remains the low, the main Fibonacci retracements are $1.6141/1.6255, $1.6369 and $1.6406 with more minor Fibonacci levels at $1.6119, $1.6201 and $1.6303.

RES 4: $1.6467 High 23 Sep
RES 3: $1.6320/30 21, 100-day moving average, Low 23 Sept
RES 2: $1.6115/34 Lows 1, 21 Sept
RES 1: $1.6085 Hourly congestion level

CURRENT LEVEL: $1.6048

SUP 1: $1.5940 5-day moving average
SUP 2: $1.5803/20 Low 8 June, Base of the daily Bollinger band
SUP 3: $1.5721/70 High Dec 2008 & 50.0% of $1.44 advance, Low 28 Sept
SUP 4: $1.5688 38.2% of $1.3500 to $1.7041

USDJPY - TECHNICALS
Dollar-yen recovery is still only testing the Tenkan line of the Ichimoku cloud at the moment with daily studies not at all convincing of a stronger recovery. Initial support is the daily Bollinger band base at Y89.00 but this level is not as strong for the yen crosses as elsewhere. Key topside level is at Y91.75 level, which was the major low seen in July and Fibonacci levels are Y91.94, Y93.05.

RES 4: Y92.53 Failure high 21 Sept
RES 3: Y91.75/94 Major low July, 38.2% retracement of Aug/Sep decline
RES 2: Y91.30/50 21-DMA, Kijun line of Ichimoku cloud,
RES 1: Y90.45 Tenkan line of Ichimoku cloud

CURRENT LEVEL: Y89.80

SUP 1: Y88.23 Low 25 Sep
SUP 2: Y87.12 Major lows Dec/Jan
SUP 3: Y86.05 Monthly high June 1995
SUP 4: Y84.50 Monthly low July 1995

DAILY CALENDAR
A busy calendar starts at 0600GMT with he release of the IMF Global Financial Stability Report and also the German August ILO employment change.

The first of many speakers comes at 0645GMT, when ECB Vice-President Lucas Papademos, ECB Governing Council member Axel Weber and Riksbank Gov. Stefan Ingves participate in a discussion on implementation of de Larosiere regulation and supervision package at The Eurofi Financial Forum, in Goteborg.

European data continues with France PPI at 0645GMT, shortly followed at 0650GMT by the release of Q2 Maastricht debt data.

The main German September unemployment rate is expected to edge up to 8.4% at 0755GMT with Germany also seeing VDMA machine-tool orders at 0800GMT.

At 0830GMT, ECB Governing Council member Christian Noyer participates in a discussion on prudential and governance rules to ensure effective financial stability? at The Eurofi Financial Forum, in Goteborg The BOE's Miles speaks in Belfast at 0900GMT, at the same time as the SNB publishes the latest Quarterly Bulletin.

EMU Sep flash HICP data is due at 0900GMT and is expected to come in at -0.2% y/y.

US data starts at 1100GMT with the weekly MBA Mortgage Application Index.

At 1200GMT, Riksbank Deputy Gov. Lars Nyberg participates in a discussion on "Crisis management of cross-border institutions: how to leverage best practices?" at the event in Goteborg, while also in Scandinavia today, although the time is uncertain, Norges Bank Governor Svein Gjedrem is due to deliver a speech at a seminar by the Center for Monetary Economics in Oslo.

US data continues with the 1215GMT release of the ADP National Employment Report, which is followed at 1230GMT by the third release of Q2 GDP and the Chain Price Index.

Second quarter GDP is expected to be revised to -1.2% in third reading for the quarter. The chain price index is expected to be revised to remain flat.

NY NAPM data is due at 1300GMT, while at 1345GMT, the Chicago PMI is expected to increase to a reading of 52.0 in September. Other regional data already released have suggested continued expansion, though still at a slow pace.

Further data sees the weekly EIA Crude Oil Stocks at 1430GMT. Central bank speakers then continue through the afternoon and evening.

At 1430GMT, Atlanta Fed President Dennis Lockhart delivers a speech on the US economic outlook on the University of South Alabama in Mobile.

At 1630GMT, ECB President Jean-Claude Trichet gives the keynote address during the event in Gotegorg.

At 1635GMT, Fed Vice Chairman Donald Kohn appears on a panel at the Cato Institute's Shadow Open Market Committee meeting on central bank exit policies.

Finally, at 1830GMT, Fed Governor Daniel Tarullo testifies to the Senate Banking Subcommittee on Security and International Trade and Commerce on international regulatory cooperation.



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