Wednesday, October 14, 2009

NordMarkets Morning FX - October 13


Tuesday sees the return of Tokyo and North American markets. Release overnight of stronger than expected data out of NZ (retail sales in Aug up 1.1% from -0.5%) and the UK (RICS house price balance jumping 22% in Sep from 11%, expectation 15%; BRC Sep retail sales up 4.9% y/y) provided some early interest as the Kiwi rallied, pulling Aussie higher with it though suggested option linked offers ahead of $0.9100 prevented further upside, the release of softer than expected NAB business condition data aiding the pullback. Cable was rising into the data release, with react taking it on to $1.5825 before reversing. Euro-dollar tracked the early buoyant tone though struggled to build on its brief show back above $1.48, the rate again said to have met decent supply from an ACB (seen in Monday trade with offers seen placed between $1.4800/20). Yen traded with a softer tone, dollar-yen edged to Y89.99 highs before meeting decent exporter supply ahead of Y90.00, but made a show above into early Europe. UK inflation data at 0830GMT and Germany ZEW at 0900GMT the morning's focus.

Euro-dollar opened Asia around $1.4775, having eased back from Monday's recovery highs at $1.4814 as move met decent supply from an ACB (offers said to have been placed to $1.4820). Rate got an early lift as risk on trades were boosted on the release of stronger than expected NZ retail sales data, the rate edged to $1.4801 but again said to have met supply from a US investment house along with further sales from an ACB which prevented further upside progress. Rate eased back before meeting support at $1.4763. Rate currently trades around $1.4785 into early European dealing. Offers said to remain in place between $1.4800/20, a break to open a move back toward $1.4845 (Sep23 high) with stronger offers noted from here and extending to $1.4850. This latter level holds option barrier interest, part of which rolls off today. Bids remain in place to $1.4760/55 with talk of stops positioned on a break below with further stops seen dotted down to $1.4730. ZEW at 0900GMT the morning's focus.

RES 3: 1.4969
RES 2: 1.4891
RES 1: 1.4833

PIVOT: 1.4755

SUP 1: 1.4697
SUP 2: 1.4619
SUP 3: 1.4561

Dollar-yen closed the holiday-thinned session Monday around Y89.85, while euro-yen failed to close inside the Ichimoku Cloud, easing back to Y132.75. Early dollar sales into the Asian session took dollar-yen down to the day's low at Y89.62 where CTA's were reportedly keen to buy the dip. Local names were then buyers on the way up, though gains were capped ahead of Y90.00 (Y89.99 high), with the rate then consolidating above Y89.70 over the balance of the Asian day. Euro-yen meanwhile traded in a tight Y132.54/92 range. Early European dealing has seen dollar-yen making a brief show back on a Y90 handle as euro-yen tries to gain a foothold above Y133.00. Next area of supply seen at Y90.20, more in the Y90.50 area from exporters with stops above. Demand said to come in back around Y89.50/55 from trust funds. Talk in Tokyo suggests exporters are more than 50% done with their hedging plans out to the end of March 2010, while larger than expected overseas sales could still raise hedging requirements in the near future. Euro-yen cloud base comes in at Y132.86 today, a close above still needed to negate downside risks.

RES 3: 91.18
RES 2: 90.81
RES 1: 90.35

PIVOT: 89.98

SUP 1: 89.52
SUP 2: 89.15
SUP 3: 88.69

Recovery off early European lows at $1.5737 extends to $1.5765, the rate currently trading around $1.5762. East European sales into the late Asia recovery cited for the drop back in sterling, with talk also mentioning that more decent sized $1.2000 one year sterling puts have gone through. Offers seen placed between $1.5770/80, a break to open a move on toward $1.5795/05 ahead of $1.5825. Stronger offers remain in place between $1.5845/50. Support now at $1.5737, more toward Monday's lows at $1.5728 with stops reported on a break of $1.5720. Traders highlight a key tech level at $1.5688, 38.2% $1.35/1.7041.

RES 3: 1.6035
RES 2: 1.5957
RES 1: 1.5883

PIVOT: 1.5805

SUP 1: 1.5731
SUP 2: 1.5653
SUP 3: 1.5579

Option expiries for today's 1400GMT cut,
* Euro-dollar; $1.4850 Exotic; $1.4850 KO
* Dollar-yen; Y90.00, Y90.50, Y90.60
* Cable; $1.5850
* Euro-Swiss; Chf1.5170, Chf1.5135
* Aussie; $0.9045, $0.9050, $0.9065

Elsewhere, Japan's benchmark stock indices ended Monday's session higher, consolidating gains above the 10,000 level. The Nikkei 225 was higher by 60.17 points, or 0.60%, to stand at 10076.56. The broader-based TOPIX was 3.57 points higher at 901.40. Volume for the Nikkei constituents totalled a preliminary 1.131 bln shares, with 132 issues trading higher, 76 lower and 17 unchanged.

Events in Europe on Tuesday start at 0630GMT, when WTO head Pascal Lamy delivers a speech at an engineering industry conference, in Berlin.

European data starts with France at 0645GMT, with August HICP inflation data and also the current account.

ECB speakers start at 0800GMT, when ECB Governing Council member Patrick Honohan delivers the opening address to a Budget Perspectives 2010 Conference, in Dublin.

UK releases inflation data at 0830GMT along with the latest DCLG House Price Index.

UK CPI (HICP) is expected to come in at 0.2% m/m, 1.3% y/y with core CPI at 1.7% y/y and the RPIX measure at 1.2% y/y.

This means annual CPI inflation is likely to reach a nadir in September largely on the back of favourable base effects from utility bills given the rise in gas and electricity bills this time last year will drop out of the annual measure. However, the annual rate looks set to hit a bottom that is firmly above 1.0%, saving the Bank of England Governor from writing an open letter that was thought was more likely than not only a few months ago. Indeed, CPI has actually surprised on the upside two-thirds of the time over the past year. This may be partly due to the earlier drop in sterling limiting the decline in import prices.

The main core-European release will be the October ZEW data from Germany, which sees a fair split in analysts forecasts this month.

The ZEW expectations indicator, which measures financial experts' expectations of Germany's economic development in six months time, rose only mildly in September to 57.7 and forecasts are split between a slight fall and a rise for October. The 1.6-point rise in the index for Sep came after a 16.6-point surge in August and left the indicator at its highest level since April 2006 and over 30 points above its long-run average of 26.6. The current situation component also saw a milder rise in September following a stronger gain in August. Indeed, the indicator rose by just 3.2 points to -74. Nonetheless, September marks the fourth consecutive monthly rise in the index from its series low of -92.8 in May and it now sits at its highest level since December.

ECB speakers continue at 0900GMT, when ECB Executive Board member Gertrude Tumpel-Gugerell delivers a speech on SEPA, in Brussels. At 1045GMT, Bank of England Monetary Policy Committee Member Adam Posen speaks at Brussels think tank Bruegel on macroprudential supervision, while further UK speakers today include the Bank of England's Bean who is speaking at an event in London.

US data starts at 1145GMT with the weekly ICSC-Goldman Store Sales data, followed by the weekly Redbook at 1255GMT and the weekly MNI Capital Goods Index at 1330GMT. The IBD/TIPP Econ Optimism Index is released at 1400GMT, while further weekly data sees the 1430GMT release of the MNI Retail Trade Index.

Fed speakers and events start at 1715GMT, when New York Fed President William Dudley speaks to the Institute of International Bankers, while at 1745GMT, Fed Vice Chair Donald Kohn is due to address the NABE annual meeting, which is continuing in St. Louis.

Fed data sees the 1800GMT release of the FOMC Meeting Minutes. Later US data then sees the 2100GMT release of the weekly ABC News Survey.

The Bank of Japan also began it's two-day policy meeting today.

Best Regards,


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