Thursday, October 15, 2009

NordMarkets Morning FX - October 15

MORNING FX

BRIEFING
The dollar remained under pressure into Asian trade Thursday, though early rally in dollar-yen (due to Gotobi Day demand into the Tokyo fix being larger than normal) provided an early anomaly. Wednesday strong earnings report from JPM, followed by better than expected US retail sales helped to boost risk on trades/dollar sales in this session, with the later release of FOMC Minutes had little new info but showed that doves still outweigh hawks which will boost market perception that the Fed remains an expected laggard for rate hikes. Release of strong NZ CPI data provided the Kiwi with another boost, the move inturn prompting further movement into risk trades to the detriment of the dollar. Euro-dollar progressed higher, moving above $1.4950 to $1.4961 with rate retaining a firm feel into early Europe. Focus on $1.5000. Dollar-yen posted highs at Y89.66 into the fix before French name sales reversed the move to take it back to Y89.27. Cable extended to $1.6070 in Asia (Europe high now $1.6075). GS and Citi Q3 earnings today's highlight along with EZ and US inflation.

EURO
Euro-dollar opened in Asia around $1.4930 with risk on trades boosted by Wednesday's release of stronger than expected JPM Q3 earnings, US retail sales data, with FOMC Minutes continuing to suggest that the US will lag other major economies in hiking rates as doves appear to still outweigh hawks. Euro-dollar initially eased to mark session lows at $1.4920, as dollar-yen saw strong Gotobi Day demand into the Tokyo fix, but quick reversal after prompted renewed pressure on the dollar. Strong NZ CPI data, along with hawkish comments from RBA Stevens further boosted risk on trades, with commodity currencies again the main beneficiaries as they led the move against the dollar. Euro-dollar found the impetus to move above Wednesday highs at $1.4948 to take out suggested barriers at $1.4950, the move peaking in Asia at $1.4961. Further demand into early Europe has extended move to $1.4967. Offers are reported in place from around $1.4970, with further interest seen positioned ahead of option barriers at $1.5000. Support at $1.4920. GS and Citi Q3 earnings in focus, along with EZ and US inflation data.

Euro-dollar bulls remain focused on the recent bull-flag target, which nearly matches the $1.4968 level that capped topside of the pair in Nov 2007. The daily studies are still pointing higher and below historic levels of reversal, although trade is now pushing outside of the Bollinger band, which sends a warning against expecting rapid gains.

RES 4: $1.5163 76.4% of $1.6039 to $1.2329
RES 3: $1.5070 2.0% moving average envelope
RES 2: $1.4993 Top of October channel
RES 1: $1.4968/72 Major high Nov 2007, Bull flag

CURRENT LEVEL: $1.4955

SUP 1: $1.4845 High 23 Sept, 5-day moving average
SUP 2: $1.4720 21-day moving average
SUP 3: $1.4500 Base of Bollinger band
SUP 4: $1.4480 Low 2 Oct



YEN
Dollar-yen closed the US session around Y89.45, with euro-yen holding gains within the Ichimoku Cloud at Y133.50. Traders noted model names buying the cross prior to the Tokyo open, lifting the rate through stops at Y133.75/85 en-route to the day's highs at Y133.91. Dollar-yen found larger than usual fixing demand thanks in part to Gotobi day, taking the pair up to Y89.67. A French name was the noted seller here, sending the rate back down to the day's lows at Y89.27 in quick time. Balance of the session was well contained as dollar-yen struggled to get back above Y89.50 and the cross held under earlier highs, pullbacks so far contained around the Y133.50 area. Stops said to be building above Y134.00 from system accounts, while techs note the top of the Ichimoku Cloud comes in at Y133.96 today, together with the 50% retrace of the August-October sell-off at Y133.90. Dollar-yen bids come in on approach to Y89.00, while offers are found at Y89.90/00 with stops at Y90.05.

Dollar-yen is attempting to break out of the first of it's broad falling ranges and tested the 21-DMA and Kijun lines to Y90.44. However, daily studies are failing to provide significant support to the recovery, keeping the overall downtrend in play. Meanwhile, the daily studies remain bullish in euro-yen as the cross tests major resistance levels at Y133.90/00, including the 100-DMA, top of the Ichimoku cloud and a 50% retracement of the post-August decline.

RES 4: Y92.53 Failure high 21 Sept
RES 3: Y91.75 38.2% retracement of Aug/Oct decline
RES 2: Y90.44 High 12 Oct, Kijun line of the Ichimoku cloud
RES 1: Y90.00 21-day moving average

CURRENT LEVEL: Y89.46

SUP 1: Y89.20 Tenkan line of Ichimoku cloud
SUP 2: Y88.01 Low 7 Oct
SUP 3: Y87.36/51 Channel base from May 22, Trend line from Apr 1995
SUP 4: Y87.12 Major lows Dec/Jan



STERLING
Definitive moves up on the back of the much better than expected UK employment data, yesterdays 1.6020 level seem to work intraday, clearly breached now and we now see 1.6120/30 level offers based on a double top, but I think we also need to be mindful of the1.6020/30 for demand. There is a bit of buying interest as I write and .9270 through.9300 in EUR/GBP which may curb a concerted move to the 1.6130 in cable, should we breach this look out for 1.6190. Following this theme, watch .9270 as support in EUR/GBP, a breach of this may give GBP more bid impetus

Cable was capped by the 21-DMA on Weds but this level is being broken at $1.6035 as daily studies point higher and momentum recovers the zero line. Close above 21-DMA would encourage bulls and be the first such close since Sep 17. Tuesday's high in euro-sterling matched that of March 27th and briefly popped over the Bollinger band top, which is currently at stg0.9395. The 21-DMA provides the main support, back at stg0.9180, although the previous highs should provide support ahead of there. Studies are neutral.

RES 4: $1.6330/45 Low 23 Sept, 100-day moving average, Bollinger top
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

CURRENT LEVEL: $1.6102

SUP 1: $1.6000 5-day moving average
SUP 2: $1.5708/21 Low 13 Oct, High Dec 2008 & 50.0% of $1.44 advance
SUP 3: $1.5688 Daily Bollinger band base, 38.2% of $1.3500 to $1.7041
SUP 4: $1.5519 Low 21 May




OPTIONS AND MORE
Option expiries for today's 1400GMT cut
* Euro-dollar; $1.5000, $1.4850
* Dollar-yen; Y89.75, Y90.00, Y88.40
* Euro-yen; Y132.90, Y135.00, Y135.30
* Cable; $1.6060
* Aussie; $0.9200


Elsewhere, Japan's benchmark stock indices ended Thursday's session higher, boosted by the overnight gains in the U.S. markets. The Nikkei 225 was higher by 178.44 points, or 1.77%, to stand at 10238.65. The broader-based TOPIX was 9.23 points higher at 903.57. Volume for the Nikkei constituents totalled a preliminary 1.422 bln shares, with 186 issues trading higher, 27 lower and 12 unchanged.

DAILY CALENDAR
European data sees EMU Sep final CPI/HICP data at 0900GMT, which is expected to confirm the preliminary release.

At the same time, Germany's leading economic research institutes release joint economic forecasts, in Berlin.

At 1125GMT, ECB President Jean-Claude Trichet gives the opening speech at a banking conference, in Frankfurt.

US data starts at 1230GMT with the weekly jobless claims, CPI data and also the NY Fed Empire State Survey for October.

Jobless claims are expected to fall 1,000 to 520,000 in the October 10 week. There should still be seasonal adjustment difficulties related to the beginning of the new quarter.

Analysts expect September CPI to rise only 0.1% as gasoline pump prices should have reversed part of their August gain. Core CPI is also expected to rise 0.1%, with back-to-school sales a key factor.

The NY Fed Empire State Index is expected to fall to a reading of 17.5 in October, but continuing to indicate expansion.

Back in Europe, at 1315GMT, ECB Governing Council member Axel Weber speaks on "Monetary Policy in Times of Financial Crisis", in Muenster, Germany.

US data continues at 1400GMT, when the Philadelphia Fed index is forecast to fall to a reading of 12.5 in October, but still indicating continued growth. This is followed by the weekly EIA Natural Gas and Crude Oil Stocks data at 1430GMT.

At 1700GMT, Bundesbank Board member Thilo Sarrazin delivers a speech on financial markets, in Berlin.

Later in the US, at 2015GMT, Treasury Secretary Timothy Geithner participates in a forum hosted by The Economist at PACE University in New York. Around the same time, at 2030GMT, M2 Money Supply data is also due.

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