Friday, October 23, 2009

NordMarkets Morning FX - October 23


The Positive close on Wall Street, the Dow closing back above 10,000 again, led to gains in Asian equity markets as risk trades gained further favour to the detriment of the dollar and yen. Euro-dollar extended recent gains, pushing through the $1.5050 barrier level to $1.5061 before meeting ACB supply which eased it back to $1.5025/20 before marking lows ahead of the european open at $1.5012. Strong demand for sterling-yen saw rate trip stops through Y152.00/25, the buying seen as the main driver as dollar-yen broke above Y91.50 to Y91.73, the rate remaining buoyed above Y91.50 ahead of the European open. Euro-yen stops were triggered above Y137.60 taking rate to Y137.83. Cable was able to extend its recent gains, breaking above $1.6638 to $1.6679. Dollar was able to pare back some of its early losses as traders reacted to media reports, Fed officials are trying to soften the guidance of future statements (especially the line 'extended period'), Fed Plosser affirming he is probably the only FOMC member willing to hike. EZ PMI's, Germany IFO and UK GDP the early focus.

Euro-dollar opened Asia around $1.5030, off NY late recovery highs of $1.5040 seen as market reacted to the rally on Wall Street. Rate initially struggled to move above $1.5030 in early trade before strong demand emerged ahead of the Tokyo fix that was able to take it through recent highs at $1.5047, triggering the reported barrier at $1.5050 before running into decent supply above $1.5060 from an Asian sovereign that capped the move at $1.5061. Rate eased lower after the fix, the rate finding initial support at $1.5025/20 before extending the pullback to $1.5012 ahead of the European open. Recovery to $1.5025 into early Europe met renewed sell interest which has eased rate back to retest the overnight lows at writing. Demand interest seen placed from around the Asian base through to $1.5000, a break to allow for a deeper move toward $1.4985/80 ($1.4988 61.8% $1.4943/1.5061) ahead of $1.4950/40. Resistance remains above $1.5060, with further interest noted between $1.5080/85 ahead of $1.5100 with area between $1.5130/40 seen providing strong tech resistance.

The euro remains in it's rising October channel of $1.4952/1.5170 as daily studies reach stretched levels and risk a bear-cross. The pair also remains within the Bollinger band and 1% MAE, which are both rising targets at $1.5055/75. Initial support is the 5-day moving average at $1.4990.

RES 4: $1.5170 Top of October channel
RES 3: $1.5163 76.4% of $1.6039 to $1.2329
RES 2: $1.5090/10 Top of the daily Bollinger band, 1% MAE
RES 1: $1.5047 High 21 Oct


SUP 1: $1.4952 Support line from 2 Oct
SUP 2: $1.4845 High 23 Sep
SUP 3: $1.4780/90 1% moving average envelope, 21-day moving average
SUP 4: $1.4480 Low 2 Oct, Base of Bollinger band

After extending October highs to Y91.71 in the US session Thursday, dollar-yen eased back to close the day around Y91.30. while euro-yen retained a buoyant tone following the move to two-month highs at Y137.43. Traders said sterling-yen demand dominated flows in the Asian session as the cross took out stops above Y152.00/25. A few dollar-yen stops were cleared on the move through Y91.50, with the rate then moving on to challenge Thursday's highs, this time stalling at Y91.73, with subsequent dips contained around the Y91.50 area into the Asian afternoon. Euro-yen followed a similar path, triggering stops on the break of Thursday's highs en-route to a fresh two-month peak at Y137.83 before stalling in line with the August 13 spike high, with dips so far contained ahead of Y137.50 into the European open. A break of the highs in the cross seen exposing the August peak in the Y138.70 area, while stops are seen through Y138.05. Dollar-yen offers eyed at Y91.90/92.00, with techs seeing the 55-day moving average as next resistance at Y91.92.

Recovery above the 21-DMA at Y90.00 encouraged bulls to finally exceed the Y91.75 Fibonacci level and improve the outlook further. Daily studies are in overbought territory but still pointing higher.

RES 4: Y93.50 100-day moving average
RES 3: Y92.90 50% retracement of Aug/Oct decline
RES 2: Y92.53 Failure high 21 Sept, Ichimoku Cloud base
RES 1: Y91.90 55-day moving average


SUP 1: Y90.25 Kijun & Tenkan line of the Ichimoku cloud
SUP 2: Y90.00 Minor support line, 21-DMA
SUP 3: Y88.83 Low 14 Oct
SUP 4: Y88.01 Low 7 Oct

Opened in Asia around $1.6610 and initially eased off to mark lows at $1.6585 before lifting back above the figure, the move boosted by reported US name buying with reported large stops above $1.6650 seen as the early target. However, rate again met resistance at the NY high of $1.6638. Rate then drifted lower, moving in tandem with euro-dollar as risk positions were pared back following the release of inline China data as well as an easing in commodity currencies on weak talk linking the move to Galleon unwind needs. Rate dipped back under $1.6600 to $1.6595, recovering to $1.6625 ahead of the European open before dropping back to $1.6580 as early Europe bought dollars. Cable currently trades around $1.6598 and edging higher at writing. Offers seen placed between $1.6620/25, more around the rally highs at $1.6638, with interest said to extend toward $1.6650 with those mentioned stops above. One trader suggests area above $1.6650 could prove messy, though another on has reported Mid East and Sovereign interest positioned between $1.6640/60.

Cable continues to extend ground, supported by daily studies, but is testing the top of the daily Bollinger band at $1.6680, which will encourage profit-taking. Momentum is also fading, sending a warning to the bulls. Main resistance levels are $1.6726/40 and the 6 Aug high of $1.7041.

RES 4: $1.7041 High 6 Aug
RES 3: $1.6740 High 11 Sep
RES 2: $1.6726 76.4% retracement of $1.7041-$1.5708
RES 1: $1.6675/80 Hourly highs, top of daily Bollinger band


SUP 1: $1.6530 5-day moving average
SUP 2: $1.6360 100-day moving average
SUP 3: $1.6240 Low 19 Oct
SUP 4: $1.6117/34 High 8 Oct, Low 1 Sept, Spike high 30 Sep, Low 21 Sep

FX Option expiries for today's 1400GMT cut,

* Euro-dollar; $1.5000, $1.4925, $1.4920, $1.4900, $1.5100
* Dollar-yen; Y92.50, Y91.50, Y91.25, Y91.00, Y90.00
* Aussie; $0.9300
* Dollar-Canada; C$1.0430

Elsewhere, Japan's benchmark stock indices ended Friday's session mixed, closing at or near the session lows. The Nikkei 225 was higher by 15.82 points, or 0.15%, to stand at 10282.99, while the broader-based TOPIX was 6.57 points lower at 902.03. Volume for the Nikkei constituents totalled a preliminary 1.304 bln shares, with 96 issues trading higher, 113 lower and 16 unchanged.

Data already out showed sales at John Lewis UK department stores rose 13.0% in the week to October 17 compared with the comparable week a year earlier, the John Lewis Partnership announced Friday. However, Lewis caution that the figures, although good, are again in comparison to the same week in 2008 - "the height of last year's finance sector turmoil." Total partnership sales in the same week were higher by 13.8% year-on-year on the comparable week in the 2008-09 trading year, Lewis stated. Meanwhile, total sales at the Waitrose food chain were higher, rising by 14.3% compared to the same week a year ago.

European data continues at 0600GMT with German construction orders for August, followed at 0645GMT by French consumer spending.

This morning also sees the flash manufacturing and services PMIs from the main European states, with Germany at 0627 expected to come in at 50.5 and 52.5, France at 0657GMT expected to come in at 53.0 and 53.9, and the main EMU data at 0757GMT expected to come in at the 50.0 mark (after 49.3) and 51.4 (after 50.9).

European data continues with the 0800GMT release of the october German IFO business sentiment data, which is expected to improve to a reading of 92.1 from 91.3.

After posting its largest gain since July 1996 in August, the index rose by just 0.8-points in September. Nevertheless, September marked the sixth successive month of increase from March's series low and the index already sits at its highest level since September 2008.

Today is expected to see small rises in both the current assessment and expectations components. The ZEW survey of investors, which can be a good indicator of the Ifo, posted a surprise decline in October.

However, while the ZEW index has now almost recouped most of the recession-related losses, the Ifo appears to still have more potential to move higher. Indeed, while the ZEW expectations index is more than 29 points above its long-run average, the equivalent Ifo indicator is still just below its historical average.

UK data sees the 0800GMT release of SMMT Car Production, followed at 0830GMT by BBA Loans For House Purchase, the first estimate of Q3 GDP and also the latest Index of Services data.

Further core-European data at 0900GMT sees EMU Sep industrial new orders, which are expected to come in at 1.5% m/m, -22.5% y/y.

The highly anticipated first estimate of Q3 GDP will reveal whether or not the UK has technically come out of recession and is expected to show a gain of 0.2% q/q to see growth returning to the UK economy at a very anaemic pace following five quarters of contraction. Yet forward looking survey indicators suggest that the third quarter should see the economy returning to growth at a more healthier pace with the services PMI averaging well above the 50-mark in Q3 at 54.2. However, this should come with a health warning given that the relationship between the PMI data and official GDP figures has been somewhat looser during the credit crunch. Should the UK economy fail to grow, however, this would make it not only the deepest but also the longest post-war recession.

In the US, the Boston Fed's Cape Cod conference in Chatham, Mass. continues. Today, at 1230GMT, Fed Chairman Ben Bernanke delivers a speech on the supervisory landscape there, with an audience Q&A session expected to follow.

US data sees the 1400GMT release of Existing Home Sales, which are expected to rise to a 5.35 million annual rate in September after falling in August.

At 1530GMT, Fed Vice Chairman Donald Kohn participates in a panel discussion on international perspectives at the Boston Fed's conference.

Best Regards,


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