Wednesday, October 14, 2009

NordMarkets Morning FX - October 14

The dollar remained under pressure into Asian trade Weds with late earnings results from Intel and CSX boosting equities, in turn favouring risk on trades to the main benefit of commodity currencies. Kiwi gained an added boost from release of strong house sales data, following on from comments from the RBNZ that it will start removing some liquidity measures. Interest rate differentials remain in focus, the forecasts for the removal of liquidity measures the main driver with tonight's FOMC Minutes to draw attention as markets seek clarity on the Fed's current position on exit strategies. Euro-dollar seen reluctant to take advantage of this further dollar weakness, but reports of overnight 0200GMT fix demand said to have provided the added upside push, the rate extending recent gains to $1.4891. Cable remained firm, extending gains to $1.5982 following BOE Bean comments and euro-sterling fix sales Tuesday. Yen firm on Mid East demand and comments from a Dep FinMin suggesting no intervention. UK jobs data at 0830GMT, EMU IP at 0900GMT and US retail sales at 1230GMT the main data focus.

Euro-dollar opened Asia around $1.4850 with rate holding a basic early range of $1.4840/50 ($1.4839 session low) before nudging higher as strong sales of dollar-yen led the pressure on the dollar. Talk also suggested that a decent sized RHS euro-dollar fix order was to be done at the 0200GMT fix and provided added upside impetus, taking the rate through Tuesday highs at $1.4876 to $1.4885. Pullbacks found support ahead of $1.4870 ahead of the European open with rate able to extend session highs to $1.4891, early Europe taking it on to $1.4895. Traders note that $1.4900 holds strike interest, with stops above said to have been building and have become an early focus. A break above $1.4900 expected to initially meet profit take selling ahead of $1.4910, to counter some of the stops buys, but a clear to open move on toward $1.4950/60 ahead of $1.4980. Traders note that $1.5000 and $1.5100 one month strikes have been popular with spec and discretionary names. Support remains in place between $1.4875/70, a break to allow for a deeper move toward $1.4840.

RES 4: $1.5163 76.4% of $1.6039 to $1.2329
RES 3: $1.5020 2.0% moving average envelope
RES 2: $1.4968 Major high Nov 2007
RES 1: $1.4908 High Aug 22 2008


SUP 1: $1.4800 5-day moving average
SUP 2: $1.4700 21-day moving average
SUP 3: $1.4530 Base of Bollinger band
SUP 4: $1.4480 Low 2 Oct

The BoJ left its overnight call rate target unchanged as expected, making no reference to corporate funding measures in its statement, despite speculation in the press that some support could have been withdrawn. The Bank upgraded its view on the Japanese economy, saying it is recovering and financial conditions are showing signs of improvement. Currency direction was driven by ongoing dollar weakness in the Asian session as the dollar-index hit fresh year-to-date lows. Early highs were hit at Y89.89 before Tokyo names sold the pair down, Mid-east names then adding weight as the rate triggered stops through Y89.50/40 down to initial lows at Y89.25. A comment from the Japanese deputy finmin about not intervening in the fx market just because of the yen's rise sparked fresh selling as dollar-yen tested bids into Y89.00. Slippage extended to Y88.83 late in the session, euro-yen following a similar path, shedding 125-points down to Y132.25, with both pairs remaining heavy into early Europe. Light bids seen at Y88.60/50, with a break set to expose last week's lows at Y88.01 ahead of barriers at Y88.00 and Y87.00.

RES 4: Y92.53 Failure high 21 Sept
RES 3: Y91.75 38.2% retracement of Aug/Oct decline
RES 2: Y90.44/50 High 12 Oct, Kijun line of the Ichimoku cloud
RES 1: Y90.10 21-day moving average


SUP 1: Y89.10/20 5-DMA & Tenkan line of Ichimoku cloud
SUP 2: Y88.01 Low 7 Oct
SUP 3: Y87.43/51 Channel base from May 22, Trend line from Apr 1995
SUP 4: Y87.12 Major lows Dec/Jan

Opened Asia around $1.5935 with early trade contained within a range of $1.5915/35 as it consolidated Tuesday's gains from intraday lows of $1.5708 (aided by BOE Bean's comments and the well reported large euro-sterling fix sell order). Rate extended lows to $1.5902 before rallying back, the move up seen as the dollar came under pressure with strong dollar-yen sales leading the move. Rate pushed through Tuesday's NY high at $1.5930 to $1.5945 before meeting resistance ahead of $1.5950. Rate dipped back to $1.5925/20 before picking up fresh demand which allowed rate to edge on to session highs at $1.5966, early Europe taking it on to $1.5995. Rate currently trades around $1.5990 with the $1.6000 level remaining in view. Traders note that a large buy of overnight $1.6000 strikes was seen in late trade Tuesday. Offers seen ahead of this level, extending to $1.6010, a break to open a move toward $1.6050/60 ahead of stronger interest at $1.6080. Support seen at $1.5950/40, stronger between $1.5925/20 ahead of $1.5900.

RES 4: $1.6330/45 Low 23 Sept, 100-day moving average
RES 3: $1.6224 50% retracement of $1.6740/$1.5708
RES 2: $1.6117/34 High 8 Oct, Low 1 Sept, Spike high 30 Sep, Low 21 Sept
RES 1: $1.6055 21-day moving average


SUP 1: $1.5920 5-day moving average
SUP 2: $1.5708/21 Low 13 Oct, High Dec 2008 & 50.0% of $1.44 advance
SUP 3: $1.5660/88 Daily Bollinger band base, 38.2% of $1.3500 to $1.7041
SUP 4: $1.5519 Low 21 May

Option expiries for today's 1400GMT cut,

* Euro-dollar; $1.4900, $1.4860, $1.4850, $1.4800, $1.4985
* Dollar-yen; Y89.00, Y89.55, Y90.00, Y90.50
* Euro-yen; Y130.00
* Euro-sterling; stg0.9400
* Dollar-Canada; C$1.0250

Elsewhere, JJapan's benchmark stock indices ended Wednesday's session lower, pressured by the stronger yen, although off the session lows seen in the wake of the Bank of Japan's policy decision. The Bank of Japan's policy board, as widely expected, voted unanimously Wednesday to leave rates unchanged at 0.1%. The BOJ didn't mention whether it will let outright purchases of commercial paper and corporate bonds from banks expire on Dec. 31 as scheduled. The Nikkei 225 was lower by 16.35 points, or 0.16%, to stand at 10060.21. The broader-based TOPIX was 7.06 points lower at 894.34, as the financials weighed. Volume for the Nikkei constituents totalled a preliminary 1.431 bln shares, with 72 issues trading higher, 141 lower and 12 unchanged.

Still to come from Japan, Bank of Japan Governor Masaaki Shirakawa holds a news conference at 0630GMT.

European data also starts at 0630GMT with the Bank of France Sep retail trade survey.

The UK releases labour market data at 0830GMT with the claimant count expected to come in at 25K.

Given that unemployment is a lagging indicator, the apparent recent slowing in the rate of increase appears to be coming far quicker than in previous economic cycles. Indeed, it is worth bearing in mind that the claimant count increased for thirty one successive months in the aftermath of the 1990's recession and the rate of increase did not slow to current levels until after two years. This would then suggest the unprecedented cut in interest rates as well as government intervention may have helped ameliorate the cull in jobs. Nonetheless, the substantial contraction in GDP growth in recent quarters looks set to leave unemployment not peaking until mid-2010, the latest time when the next general election can take place.

Core-European data sees EMU industrial output at 0900GMT, which is expected to come in at 1.2% m/m, -15.5% y/y.

Such an uptick in industrial output across the region for August would follow the rise in production over the month already reported for Germany (+1.7%), France (+1.8%) and Italy (+7.0%).

US data starts at 1100GMT with the weekly MBA Mortgage Application Index, while at 1230GMT retail sales and the export, import price index is due.

Retail sales are expected to fell 2.1% in September. Industry light vehicle sales plunged in the month after the August surge. In addition, gasoline prices fell slightly and should offset gains in other categories. Sales excluding motor vehicles and parts are expected to rise 0.3%.

At 1315GMT, ECB Executive Board member Lorenzo Bini Smaghi delivers a speech on "Monetary Policy and Asset Prices," in Freiburg, Germany.

US data continues at 1400GMT, when business inventories are expected to fall 0.9% in August. Factory inventories were already reported fell 0.8%, while wholesale inventories fell 1.3% in the month.

Later, at 1800GMT, the U.S. Treasury is expected to post a $31.0 billion deficit in September compared with the $45.7 billion surplus in September 2008. The full fiscal year deficit is much deeper than the previous year's level due to the fiscal stimulus packages and a dip in tax receipts.

Finally, at 1830GMT, Fed Governor Daniel Tarullo and FDIC Chair Sheila Bair testify before the Senate Banking Committee on the state of the banking industry.

Best Regards,


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