Tuesday, October 20, 2009

NordMarkets Morning FX - October 20

MORNING FX

BRIEFING
The dollar remained under pressure into early Asian trade with risk trades boosted by After the Bell releases from Apple and Texas Instruments, the strong earnings data providing a lift for US index futures and Asian equities. Last night's meeting of Eurogroup finance ministers in Luxembourg seemed to show an absence of concern about the euro's strength, at least publicly, which was seen adding to euro demand into early Asia. Euro-dollar was the main focus in a will it, won't it break $1.5000, the move up posting highs at $1.4994 before meeting strong offers stacked toward the figure which prevented further upside progress. RBA Minutes reflected RBA Stevens' hawkish tone from last week and provided a lift above $0.9300 for the Aussie, only to meet strong supply that restricted upmove at $0.9310. A major Japanese name cited for taking dollar-yen down from Y90.75 to Y90.35, with further sales taking it on to Y90.08. Asian central banks were active overnight buying dollar-Asia with expectation of balancing to be seen into Europe. Dollar remains soft into Europe with focus remaining on $1.5000.

EURO
Euro-dollar opened Asia around $1.4958, the release of strong earnings reports from Apple and Texas Instruments After the Bell, as well as no major concern voiced over the strength of the euro out of last night's meeting of EU-16 FinMins, prompted strong demand for euro-dollar, the buying able to push rate through the NY high at $1.4967, breaking into fresh 14 month highs above $1.4968, with stops triggered on the break of $1.4975 to take it on to an initial high of $1.4980. A UK clearer sold it back to $1.4960/55 before rate picked up fresh demand into the afternoon session, the buying extending the rally to $1.4994 before meeting strong offers, reportedly stacked toward the much reported barrier level at $1.5000. Traders did note that a major Japanese name was a stand out seller ahead of the figure. Rate then settled back into a $1.4965/85 range ahead of the European open, currently trading around $1.4970. Offers remain in place to $1.5000, with talk of a mix of offers and stops placed between $1.5005/10. Support seen at $1.4965 through to $1.4950, stronger at $1.4920 and $1.4880/70.

The euro is edging above the recent double top to score new highs, although the daily studies are reaching very stretched levels and momentum is fading. Overall trend is clearly firm, however, and the pair remains within the Bollinger band and 1% MAE, which are both rising targets at $1.5010/20, as well as within the rising October channel of $1.4862/1.5079.

RES 4: $1.5163 76.4% of $1.6039 to $1.2329
RES 3: $1.5155 2.0% moving average envelope
RES 2: $1.5079 Top of October channel
RES 1: $1.5010/20 Top of the daily Bollinger band, 1% MAE

CURRENT LEVEL: $1.4977

SUP 1: $1.4862 Support line, High 23 Sep
SUP 2: $1.4750 21-day moving average
SUP 3: $1.4700 1% moving average envelope
SUP 4: $1.4480 Low 2 Oct, Base of Bollinger band



YEN
Dollar-yen closed the US session Monday towards the bottom-end of the range around Y90.55, while euro-yen ended around earlier Asian opening levels at Y135.50. Early highs were notched into the Asian session at Y90.80 and Y135.84 before both pairs came lower, largely on the back of dollar-yen supply coming from a major Japanese name which knocked the pair down to initial lows at Y90.35. Euro-yen meanwhile fell back to Y135.20, subsequent bounces relatively limited in both pairs before fresh lows were hit into the Asian afternoon at Y90.08 and Y134.87. Toushin interest is on the radar for Wednesday, as a Japanese investment house is scheduled to issue approximately Y1.2trn of fresh funds, said to primarily be made up of Brazil, South Africa and Australia. Dollar-yen trading around Y90.20 into the European session, traders now seeing bids into Y90.00 where large expiry interest is again noted for the NY cut today. Techs see the 21-day moving average as key at Y89.93. Offers are back at Y90.40/60 in small, stronger at and above Y91.00. Euro-yen supply still seen into Y136.00/10 with stops above.

Dollar-yen put in a short-term base following bounce ahead of key support levels at Y87.12, while recovery above the 21-DMA at Y89.90 also encouraged bulls to target the Y91.75 Fibonacci level. However, daily studies are fading and while Y91.33 remains the near-term High, Fibonacci levels are at Y90.06, Y89.67 and Y89.27. The daily studies remain bullish in euro-yen, although are starting to look stretched as the cross holds over resistance at The move now risks stalling at the 24 Aug high of Y136.08.

RES 4: Y92.90 50% retracement of Aug/Oct decline
RES 3: Y92.53 Failure high 21 Sept
RES 2: Y91.75 38.2% retracement of Aug/Oct decline
RES 1: Y91.33 High 16 Oct

CURRENT LEVEL: Y90.16

SUP 1: Y89.90 21-day moving average
SUP 2: Y89.50/60 Minor support line, Tenkan line of Ichimoku cloud
SUP 3: Y88.83 Low 14 Oct
SUP 4: Y88.01 Low 7 Oct



STERLING
Cable opened Asia around $1.6395 and pushed to retest NY highs at $1.6425 as the dollar came under early pressure into the session. Rate failed to break above on this initial attempt, dropping back below the figure only to meet strong demand at $1.6375 that provided the overnight base. Rate edged back, pivoting the figure for the balance of the overnight session before early Europe provided renewed demand interest to take it above the overnight high. Triggered stops added to the upside momentum to take it on to $1.6447, with reported offers ahead of $1.6450 above to counter. Rate currently seen resting on the broken resistance at $1.6425, with bid interest seen placed to $1.6420. A break here to allow for a deeper pullback toward $1.6505/395 with stronger interest remaining in place at $1.6375. Above $1.6450 to open a move toward $1.6470/80 ahead of $1.6500.

Cable continues to extend ground above the 21-DMA and holds above initial support of $1.6300/1,6240. Daily studies remain firm for now with the stochastic pushing into overbought territory but below historic highs. The move is now testing the top of the Bollinger band as well as a resistance line from 6 Aug, which coincide at $1.6438. Euro-sterling backed away from the top of the daily Bollinger band and subsequently crashed through the 21-DMA, which turns initial resistance with the 5-DMA at stg0.9165/90. Studies are negative and now gaining momentum, encouraging bears to target Fibonacci levels at stg0.9047/58.

RES 4: $1.6740 High 11 Sep
RES 3: $1.6532 61.8% retracement of $1.7041-$1.5708
RES 2: $1.6467 High 23 Sep
RES 1: $1.6438 Resistance line from Aug 6, Top of daily Bollinger band

CURRENT LEVEL: $1.6405

SUP 1: $1.6300 5-day moving average
SUP 2: $1.6240 Low 19 Oct
SUP 3: $1.6117/34 High 8 Oct, Low 1 Sept, Spike high 30 Sep, Low 21 Sep
SUP 4: $1.6050 21-day moving average




OPTIONS AND MORE
FX Option expiries for today's 1400GMT cut,
* Euro-dollar; $1.5000, $1.5300. Exotic; $1.5000 KO
* Dollar-yen; Y90.00(lge), Y89.75, Y90.60
* Aussie; $0.9300
* Dollar-Canada; C$1.0300, C$1.0250, C$1.0450


Elsewhere, Japan's benchmark stock indices ended Tuesday's session higher, boosted by overnight gains in the US. The Nikkei 225 was higher by 100.33 points, or 0.98%, to stand at 10336.84, while the broader-based TOPIX was 7.65 points higher at 913.45. Volume for the Nikkei constituents totalled a preliminary 1.229 bln shares, with 150 issues trading higher, 52 lower and 23 unchanged.

DAILY CALENDAR
European data for Tuesday started at 0600GMT, showing German producer prices fell 0.5% between August and September, leaving the annual change at -7.6%. Excluding energy prices, which fell 1.7% on the month and 16.4% on the year, PPI was unchanged month-over-month and down 3.3% in the year to September.

There is a slew of UK data at 0830GMT, including Provisional M4 Money Supply, the September public finances report , BoE capital issuance data and also CML Gross Mortgage Lending, also for September.

US data starts at 1145GMT with the weekly ICSC-Goldman Store Sales data, which is followed at 1230GMT by Housing Starts, Building Permits and the Sep Producer Price Index.

Producer prices are expected to fall 0.3% in September. Analysts expect a decline in energy prices following the sharp movements in recent months. Gasoline pump prices were reported down slightly. Core PPI is expected to rise 0.1%.

Housing starts are expected to rise to a 615,000 annual rate in September, as builders have now found inventory levels more tolerable.

US data continues at 1255GMT with the weekly Redbook Average. The Bank of Canada Interest Rate Announcement is then due at 1300GMT.

Later on, at 1915GMT, the Bank of England's King speaks in Edinburgh.

Late US data sees the 2100GMT release of the weekly ABC News Survey, while at midnightGMT Tuesday night, Philadelphia Fed President Charles Plosser delivers a speech on monetary policy in a tough environment to the Standford Institute for Economic Policy Research in Palo Alto, California.




Best Regards,

NordMarkets.com

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