Thursday, October 29, 2009

NordMarkets Morning FX - October 29

The negative close on Wall Street passed over to Asian equity markets with the recent paring back of risk trades continuing through the overnight session. Yen and dollar were the main beneficiaries, strong sales of yen crosses, Aussie-yen and sterling-yen highlighted, helped to punch dollar-yen to session lows of Y90.23, with euro-yen making an appearance below Y133.00, trading to a low of Y132.81. Euro-dollar remained under pressure, having been sold off after Wednesday's London fix, extending the NY low of $1.4693 to $1.4683 in early trade before rate was able to recover back above the figure. This correction allowed euro-yen to edge back above Y133 later in the session, though the euro seen under renewed pressure in early Europe. RBNZ left interest rates unchanged, as widely expected, the accompanying statement disappointing as it provided no indication for any near term rate hikes. Kiwi came under pressure, Aussie-kiwi was able to lift despite the reported sales of Aussie-yen. US GDP data today's highlight, with German unemployment, UK money data and EMU confidence also noted.

Euro-dollar opened the Asian session around $1.4720, off late NY lows of $1.4690, with the recovery extending to around $1.4730 in early trade before meeting strong headwinds from cross yen sales. Rate dropped back, moving through the NY low to $1.4683, the move meeting decent demand interest in the area between $1.4685/80 before recovering. Talk late Wednesday suggested that the $1.4680 level holds the strike of a large expiring option for today's 1400GMT cut and expected to provide some attractive influence. Upside correction continued through the balance of the Asian session, the rate edging up to highs of $1.4736. Rate dropped back toward $1.4700 ($1.4703 61.8% $1.4683/1.4736) as early Europe sold into the recovery, but dip attracted further demand, lifting it back to current level around $1.4720. Weak talk in Asia suggested Asian sovereign demand seen off the earlier lows and expected a similar scenario to Wednesday with ACB's buying into dips. Bids remain in place toward $1.4700, stronger between $1.4685/80. Offers $1.4736 through to $1.4750. Further offers $1.4770/80. US GDP the main focus.

Elsewhere, euro-sterling is under pressure again into early European trade Thursday, with traders noting further long positions getting squeezed out, with continued talk that M&A related sales have provided the main downside lead. Rate saw a low in NY of stg0.8951, consolidated the break under stg0.9000 in Asia between stg0.8976/95, with the reported early sales taking the rate to early session lows at stg0.8955. Bids remain in place to stg0.8950, a break below to open a deeper move toward stg0.8910, with demand noted from here and extending to stg0.8898. Some suggest stg0.8840 as a near term target. Resistance remains toward stg0.9000.

The euro sees the bear-cross in the daily Stochastic, 10-day momentum and now in the 5 & 21-DMAs, keeping bear's on further Fibonacci retracements at $1.4628 and $1.4561. Bulls now need a break above $1.4825/35 to get back in control.

RES 4: $1.5163 76.4% of $1.6039 to $1.2329
RES 3: $1.5080/10 Top of the daily Bollinger band
RES 2: $1.5060/64 Potential double-day high 23, 26 Oct, 1% MAE
RES 1: $1.4825/35 5, 21-day moving average


SUP 1: $1.4628 50% retracement of Sep-Oct rally
SUP 2: $1.4561/90 38.2% of the Jun-Oct advance 2% MAE, Bollinger band
SUP 3: $1.4480/88 Low 2 Oct, 23.6% of Mar-Oct advance
SUP 4: $1.4407/47 50% retracement of June-October advance, High 5 Aug

Yen crosses were under heavy pressure in the NY session as euro-yen gave back close to 200-points, closing just off the Y133.28 low, while dollar-yen slipped back to Y90.55, ending around Y90.75 amidst a backdrop of negative equity markets. Early Asian dealing then saw Japanese margin stops being triggered in the crosses as Aussie-yen and sterling-yen were sold heavily. Euro-yen followed suit, slipping from early highs at Y133.73 to fresh lows for the recent run at Y132.81. Dollar-yen had notched early highs at Y90.81 before a move down to Y90.40, while Japanese data again came in better than forecast as Industrial Production rose 1.4% m/m versus expectations of +1%. Tokyo names gunned for stops through Y90.30 as dollar-yen slipped to Y90.23, consolidating under Y90.40 into the Asian afternoon. Euro-yen was able to bounce back to Y133.30, subsequently remaining contained in a relatively tight range ahead of the European open. Early Europe now seeing bounces extended as dollar-yen makes a show above Y90.50 and euro-yen moves to Y133.40.

Dollar-yen sees bids in the Y90.20/15 area this morning, with stops coming in below Y90.00. Techs see the 50% retrace of this month's rally under pressure at Y90.17, ahead of the 61.8% retrace at Y89.66. Traders are also noting Toushin issuance today for a maximum value of Y400bn, said to be split primarily between S. Africa, Brazil and Australia, though Tokyo names were not expecting a good take-up. Better results are expected Friday with Y1trn of issuance due (Y100bn each for S.Africa, Brazil, China and Australia).

The daily stochastic is now making a bear-cross in dollar-yen as the market pulls back below the 8 Oct support line and tests the Kijun line and 21-DMA at Y90.10/25. Initial resistance is at Y91.25/40 from the Tankan line and 5-day moving average. Euro-yen has pulled back further and now moved below a series of resistance from Y133.50 to Y134.00, which includes the parameters of the Ichimoku cloud and also the 21 & 100-DMAs. This all comes after the daily stochastic sees a bear-cross. Next Fibonacci level is nearby, at Y132.68.

RES 4: Y92.81/90 Projected channel top, 50% of Aug/Oct decline
RES 3: Y92.53 Failure high 21 Sep
RES 2: Y92.00 Base of the Ichimoku cloud
RES 1: Y91.25 Tenkan line of the Ichimoku cloud


SUP 1: Y90.25 21-day moving average
SUP 2: Y90.09/17 Low 20 Oct,Kijun line, 50% of October rally
SUP 3: Y89.66 61.8% retracement of October rally
SUP 4: Y88.80 Lows 14 Oct

Opened Asia around $1.6390 and initially edged to mark session highs at $1.6409 before meeting strong headwind sales as Japanese accounts sold yen crosses, sterling-yen and aussie-yen coming under the main pressure. Cable was pressured to lows of $1.6335 (almost mirroring Wednesday's early Asian move). Cable recovered off lows, as continued sales of euro-sterling provided a counter to sterling-yen supply, the rate edging back to $1.6400 ahead of the European open, dipping back to $1.6360 before stronger selling in euro-sterling provided the added upside momentum to spike cable to $1.6446. Rate currently trades around $1.6440. Offers seen placed between $1.6465/70 with recent reports noting stops in place on a break above. Tech resistance noted around $1.6480 may restrict further upside move, one trader suggests. However, through here and rate can edge toward $1.6500 ahead of $1.6530/35. Support seen at $1.6420 (23.6% $1.6335/1.6446), a break here to allow for a deeper move toward $1.6405/00.

In Cable, the bearish engulfing pattern and the bear-cross in the stochastic now risks being joined by a bear-cross in the 10-day momentum, keeping bear's attention on Fibonacci retracements of the $1.5708 to $1.6694 rally from $1.6201 and the $1.6115/70 support area, which starts with the 21-DMA. While $1.6251 remains the low, upside retracements are $1.6474, $1.6526.

RES 4: $1.6726/40 76.4% retracement of $1.7041-$1.5708, High 11 Sep
RES 3: $1.6695 Current top of the daily Bollinger band, High 23 Oct
RES 2: $1.6526 61.8% retracement
RES 1: $1.6474 50% retracement of 23 Oct decline


SUP 1: $1.6240 Low 19 Oct
SUP 2: $1.6201 50% retracement of the October recovery
SUP 3: $1.6170 21-day moving average
SUP 4: $1.6115/34 High 8 Oct, Low 1 Sep, Spike 30 Sep, Low 21 Sep

European data for Thursday started at 0700GMT when German seasonally adjusted employment fell by 33,000 persons between August and September to 40.101 million, according to the Federal Statistical Office. In non-seasonally adjusted terms, employment rose by 269,000 to 40.355 million as measured by the International Labour Organization.

From 0730GMT, there is an ECB conference on key developments in monetary economics. Speeches will be delivered by ECB President Jean-Claude Trichet and Vice-President Lucas Papdemos. The event takes place in Frankfurt and continues through to Friday.

At 0800GMT, German Chancellor Angela Merkel is due to deliver a speech in parliament on the agenda of her new government.

The main German unemployment data for October is due at 0855GMT and is expected to see the unemployment rate edge up to 8.3%. This is followed shortly by German VDMA machine-tool orders data at 0900GMT.

UK data at 0830GMT Thursday sees Final M4 Lending, Lending Secured On Dwellings, Consumer Credit and also Final M4 Money Supply. Final EMU data at 1000GMT sees the EMU October economic sentiment index and the business climate indicator, where the economic sentiment index is expected to rise to 84.5 from 82.8 last month.

At 1000GMT, ECB Governing Council member Mario Draghi speaks at the "2009 World savings day", in Rome , while at 1110GMT, ECB Governing Council member Axel Weber is due to participate in a discussion on the financial crisis, at an event in Berlin.

US data starts at 1230GMT with the weekly Jobless Claims, while Q2 GDP and the Chain Price Index are due at the same time.

Jobless claims are expected to fall 6,000 to 525,000 in the October 24 week, while third quarter advance GDP is expected to rise 3.0% after the 0.7% decline in the previous quarter.

The key factors are expected to be a strong gain in PCE due to car sales, smaller fixed investment and inventory declines, and increased government spending. Net exports appear to be a very modest drag in this quarter's release and after adding to growth in previous quarters. The chain price index is forecast to rise 1.4% after the flat reading in the second quarter.

At 1330GMT, Treasury Secretary Tim Geithner testifies to the House Financial Services Committee on "Systemic Regulation, Prudential Matters, Resolution Authority and Securitization."

US data then continues at 1400GMT with Housing Vacancies data, which is followed at 1430GMT by the weekly Natural Gas Stocks data and at 1500GMT by Kansas City Fed Production.

Later on, at 1615GMT, White House National Economic Council head Lawrence Summers speaks to the Economic Club of New York.

Late in Europe, at 1730GMT, Bundesbank board member Thilo Sarrazin takes part in a panel discussion, in Berlin.

Late US data sees the 2030GMT release of M2 Money Supply. Overnight, at 0040GMT Friday, Treasury Secretary Tim Geithner speaks to the Economic Club of Chicago.

Best Regards,


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