Tuesday, November 10, 2009

10 November 2009


Risk remained in favour into early Asian trade, supported by the positive close on Wall Street, though early pressure on the dollar was tempered by reported Asian sovereign demand. Euro-dollar continued to meet headwind supply on moves above $1.5000, with reports of ACB supply situated between $1.5020/30 countering upside pressure and allowing for a pullback from early highs of $1.5013 to $1.4950. Aussie and Kiwi traded with an underlying form tone, but profit taking by real money accounts helped to cap the former below $0.9330. Sterling was given a minor lift on release of stronger than expected BRC retail sales and RICS housing data, but the positive react only provided for better levels for stale longs to cover back. Sterling was given a severe shock late on as Fitch Head of Sovereigns suggested UK was most at risk for a downgrade among major economies. Cable dropped from $1.6760 t0 $1.6600, slowly clawing its way back into the European open. US data calendar remains light, German CPI at 0700GMT, UK trade at 0930 GMT and ZEW at 1000GMT the morning's highlights.

Euro-dollar opened Asia around $1.4990, the rate having consolidated during the NY afternoon in a tight range around $1.5000. Risk remained in favour into early Asian dealing with the dollar coming under early pressure, the rate able to move above $1.5000, posting highs at $1.5013 before meeting resistance. Strong talk in Asia of ACB sell interest between $1.5020/30. Rate reversed as spec longs covered back, with strong sales of euro-yen, along with noted sales from model funds, adding weight that took rate back to $1.4970. Swiss name demand provided some respite, lifting rate to $1.4980 before further sales knocked it down to $1.4950. This latter move was seen led by a reaction to Fitch comments suggesting UK was most at risk of losing its AAA staus among the four leading economies, dropping cable 150 points. However, comment that Germany was the least likely provided for a stronger recovery in euro-dollar, taking it to $1.4990 area, while cable lagged correction. Euro-dollar bids remain at $1.4950, with resistance $1.5020/30. Russian sales of euro-dollar into early Europe ease rate back to $1.4982.

The momentum is still struggling to maintain an upward break in euro-dollar, although the pair has seen a bull-cross in the daily Stochastic study and now in the 5 & 21-DMAs, which are initial support at $1.4915 and $1.4885. Close above 21-DMA helps bulls to turn attention to the $1.5060/64 highs.

RES 4: $1.5135 2% Moving Average Envelope
RES 3: $1.5090 Current Bollinger band top
RES 2: $1.5060/64 Double-day high 23, 26 October
RES 1: $1.5021 High 9 Nov


SUP 1: $1.4915 5-day moving average
SUP 2: $1.4885 21-day moving average
SUP 3: $1.4680 Support line 17 Aug, 1% MAE, Base of Bollinger band
SUP 4: $1.4618/20 76.4% of Oct recovery, 50% of Sep-Oct advance

Dollar-yen closed a quiet US session around Y89.95, with euro-yen also holding steady to end around Y134.90. Initial lows were hit into the Asian session around Y89.80 before Japanese real-money demand kicked in, lifting the pair to session highs at Y90.05. Option related selling was noted here, amid reports of decent-sized expiry interest rolling off at Y90.00 in the next few days. Euro-yen hit early highs at Y135.00 before slipping back to the Y134.70 and holding within a tight range over the remainder of the morning session. Dollar-yen held above Y89.80 into the Asian afternoon before a late dip to the day's lows at Y89.68 as euro-yen slipped to Y134.30, despite a positive close for the Nikkei. Early European dealing sees both pairs holding off lows, offers seen at and around Y90.00, more at Y90.35/45 with system stops still lurking at Y90.50. Key resistance still seen as the base of the falling Ichimoku Cloud at Y90.40. Options traders report increasing demand for one-month to six-month dollar-yen upside via both vanilla and exotic trades.

The daily stochastic remains soft as the market holds below the Tenkan line and 21-DMA at Y90.50/70. The market is stalling around Fibonacci level of Y89.66 and spike low of Y89.21, while main nearby resistance is the base of the Ichimoku cloud, at Y90.40. The daily stochastic seeks a base in euro-yen although momentum is yet to make a bull-cross. After recently breaking the base of the Ichimoku cloud, the cross has now exceeded the top at Y133.90, which becomes initial support and will encourage bulls if the break is sustained and Fibonacci/high at Y135.64/98 can be tackled.

RES 4: Y92.80/90/00 100-DMA, 50% of Aug/Oct decline, Ichimoku cloud top
RES 3: Y92.32/53 Failure highs 27 Oct, 21 Sep
RES 2: Y91.31 High 4 Nov
RES 1: Y90.40 Base of the Ichimoku cloud


SUP 1: Y89.66 61.8% retracement of October rally
SUP 2: Y89.21 Spike low 30 Oct
SUP 3: Y88.80 Lows 14 Oct
SUP 4: Y88.24 Low 25 Sep

Opened Asia at $1.6760 with early risk trade, following the positive close on Wall Street, allowing the rate to drift up to highs of $1.6789, with traders noting reaction to strong BRC retail sales and RICS housing data tempered as stale longs took advantage to pare back positions. Rate eased to $1.6735, recovering back to $1.6760 before dropping violently lower as market reacted to Fitch comments suggesting that out of the four major economies the UK was most at risk of losing its AAA status. Cable dropped to $1.6610 in a straight line, the move extending to $1.6600 before rate slowly clawed its way higher, edging to $1.6675/80 into the european open. Fresh sell interest took rate back to $1.6625, the recovery boosted as a 'good name' bought sterling between $1.6630/35 to take it up to $1.6665/70. Recovery efforts remain laboured, a break above $1.6680 to boost a positive feel, but while it remains below seen keeping the overnight lows in view. Bids now reported between $1.6610/00 with stops $1.6595/90.

The focus for cable is the sharp reversal from the $1.6844 high, which is holding around the 5-DMA of $1.6620 but remains above the key 21-DMA at $1.6425. Studies are mixed with a downturn in momentum yet to make a bear-cross. While above $1.6425 and a minor support line at $1.6451, bulls will hope for a return to the topside. Euro-sterling remains below the 21-DMA at stg0.9065 with daily studies still bouncing along the lows. While stg0.8896 remains the low, the main Fibonacci levels are stg0.9093, stg0.9154 and stg0.9214. Initial support & resistance is at stg0.8965 and stg0.9017.

RES 4: $1.7240 100% projection of first October upwave
RES 3: $1.7044/52 High 5 August, November 2005 low
RES 2: $1.6844 High 9 Nov
RES 1: $1.6790 Current top of the daily Bollinger band


SUP 1: $1.6620 5-day moving average
SUP 2: $1.6425 21-day moving average
SUP 3: $1.6240 Low 19 Oct
SUP 4: $1.6115/34 High 8 Oct, Low 1 Sep, Spike 30 Sep, Low 21 Sep

FX Option expiries for today's 1500GMT cut

* Euro-dollar; $1.5000, $1.5050
* Dollar-yen; Y89.00, Y90.00, Y90.70, Y91.00
* Cable; $1.6700
* Aussie; $0.9250(lge)

European equity bourses are seen opening higher today, buoyed by a strong session on Wall St overnight. Earnings results from Vodafone (VOD), Credit Agricole (ACA) and a trading statement from HSBC (HSBA) will take focus on the corporate front this morning, and on the economic calender, UK Trade Balance data and UK DCLG House Prices at 0930GMT, as well as German ZEW at 1000GMT, will be eyed for direction. Spreadbetters have the FTSE-100 up 16pts, CAC-40 up 5pts and Xetra-DAX up 13pts.

European data started with the inflation data for Germany at 0700GMT, where German HICP was revised down to +0.1% for the month in October, bringing the annual rate to -0.1%, the Federal Statistical Office reported on Tuesday. The HICP was below the median forecast.

France industrial production data is due at 0745GMT and is expected to rise by 0.5% m/m, falling by a reading of -9.7% y/y. Industrial investment data is due at 0750GMT, while Italian industrial output data follows at 0900GMT.

UK data at 0930GMT sees the DCLG House Price Index and the Total Trade Balance data, which are followed at 1000GMT by the latest Leading Indicator Index .

The main European data release is the 1000GMT ZEW data. The ZEW economic sentiment indicator fell by 1.7 points to 56.0 in October, following a 1.6-point rise in September. Meanwhile, its current conditions counterpart posted a fifth successive gain in the month, rising by 1.8 points to hit -72.2. Another mixed picture is expected today with median forecasts looking for a decline to 54.3 but an improvement to -70 in those numbers.

The European afternoon and evening are dominated by a long list of European and Fed speakers, starting at 1300GMT, when ECB Governing Council member Marko Kranjec speaks on a panel (to be confirmed), in Vienna.

US data starts just ahead of then, at 1245GMT with the weekly ICSC-Goldman Store Sales data, which is followed by the weekly Redbook Average at 1355GMT.

At 1400GMT, ECB Governing Council member Jose Manuel Gonzalez-Paramo speaks in the European Parliament.

At 1415GMT, Atlanta Fed President Dennis Lockhart delivers a speech on the economy to the Urban Land Institute conference in Atlanta, while at 1500GMT, San Francisco FedP resident Janet Yellen delivers a speech on the economic outlook and real estate to Lambda Alpha International in Phoenix.

The US Economic Optimism Index is also due at 1500GMT. At 1545GMT, ECB Governing Council member Jose Manuel Gonzalez-Paramo is due to give a keynote speech on the origins of the crisis and possible solutions, in Brussels.

At 1615GMT, Boston Fed President Eric Rosengren delivers a speech to the European Economics and Financial Centre in London.

In Norway, at 1630GMT, Norges Bank Deputy Governor Jan Qvigstad delivers a speech at the Norwegian Academy of Science and Letters, in Oslo. Data then continues with the 1700GMT release of the Energy Information Agency monthly Short-Term Energy Outlook.

Later on, US data sees Treasury Allotments By Class at 2000GMT, while at 2030GMT, Fed Governor Daniel Tarullo speaks on resolution authority to the Institute of International Bankers in New York.

The weekly ABC News Survey is released at 2200GMT. Into 0030 Wednesday, Dallas Fed President Richard Fisher delivers a speech on the economic outlook to the Austin Headliners Club in Austin.

Best Regards,



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