17 November 2009

MORNING FX
BRIEFING
The market this week will be focusing on inflation data for most of the major economies, as well as Q3 GDP for several EM countries. Fed Bernanke headlines a week full of speeches by Fed officials, Bernanke, Fisher and Kohn are due to speak this evening. Most expected to repeat that exits from non-conventional policies are necessary but still too early to initiate such moves. ECB Trichet speaks Thursday and Friday. RBA and MPC minutes will be released on Tuesday and Wednesday respectively. The dollar came under early pressure into Asian trade as any hopes for a surprise change in the yuan were quashed in Chinese press reports over the weekend. Cable was pressured higher in early trade as a Swiss bank hunted out stops above $1.6700, taking the rate to highs of $1.6735. The move lifted euro-dollar and Aussie with it, the former trading up from early lows at $1.4905 to $1.4974. Aussie trailed the rally as Aussie-yen sales provided counter. Dollar-yen was pressed lower, stronger than expected Q3 GDP data and model fund sales providing weight though countered by Toshin-linked buyers.

EURO
Euro-dollar opened Asia around session lows of $1.4905 and was pressured higher as the dollar came under early pressure as weekend hopes for a statement from China for a change in the yuan peg were quashed by press reports. Rate pushed to an initial high of $1.4965 before momentum waned, the rate slipping back to $1.4935 as euro-yen was sold off after the Tokyo fix. A reversal in the cross, on reported short covering, allowed euro-dollar another rally this time extending the session highs to $1.4974. Upside pressure remains into early Europe with the topside stretching on to $1.4979, currently trading around $1.4975. Offers seen placed toward $1.4980/85, stronger on approach to $1.5000 with one trader suggesting that sovereign accounts are expected to try and keep rate enclosed within a $1.4800/1.5000 range. A break above $1.5000 to expose $1.5015/20 ahead of stronger $1.5050/65 area. Barriers have recently been noted at $1.5050 and at $1.5070 (recent high $1.5049), as well as a $1.48/1.51 short dated dnt in play (helped to keep rate buoyed above $1.4800 Friday). Support $1.4920, $1.4905/00.

The euro-dollar faded ahead of the highs at $1.5060/64 and the subsequent pullback is holding around the 5 & 21-DMAs at $1.4890 and $1.4945. These levels remain in focus as the euro seeks direction with bulls encouraged by a positive daily stochastic study but momentum uninspiring. The pair remains broadly constructive above the 17 August support line at $1.4722.

RES 4: $1.5210 2% moving average envelope
RES 3: $1.5163/75 76.4% of decline from July 2008 high, Res line 3 June
RES 2: $1.5100 Current Bollinger band top
RES 1: $1.5047/64 High 11 Nov, Double-day high 23, 26 October

CURRENT LEVEL: $1.4965

SUP 1: $1.4890 21-day moving average
SUP 2: $1.4788 61.8% retracement of $1.4628 rally
SUP 3: $1.4722 Support line 17 Aug
SUP 4: $1.4628/80 Low 3 Nov, Base of Bollinger band


YEN
Japan Q3 GDP came in well ahead of expectations at +1.3% q/q (cons. +0.7%). representing the fastest rate of growth seen since Q1 2007, though analysts sounded a note of caution as inventory replenishment contributed +0.4% to the final figure. Note Q2 GDP was also revised up from 0.6% to 0.7% q/q. Traders said the data failed to inspire the currency market, with main focus centred around talk of sizeable Toushin issuance for today and tomorrow. Model supply of yen crosses pulled dollar-yen lower in the morning session,dropping under Friday's Y89.46 NY low to Y89.38 as euro-yen slipped to Y133.65. Chatter of semi-official demand under Y89.40 provided a cushion, prompting spec buying of dollars and lifting the pair back to the day's highs at Y89.74. Euro-yen meanwhile was able to regain the Y134 handle, moving to a Y134.18 high into the Asian afternoon. Toushin takeup said to be disappointing for today's launch, though Tuesday's offering said to be attracting stronger interest. Dollar-yen offers seen into Y90.00 with stops at Y90.05. Downside stops are lurking through Y89.30.

Dollar-yen studies remain soft and just above oversold levels as the market trades below the Ichimoku cloud at Y89.95 and bears focus on the Y89.21 lows. While that low remains in place, the main nearby Fibonacci levels are Y90.77 and Y91.13, although break there will get bears focused on the major low of Y88.02.

RES 4: Y92.32/53 Failure highs 27 Oct, 21 Sep, 100-day moving average
RES 3: Y91.31 High 4 Nov
RES 2: Y90.70 21, 55-day moving average
RES 1: Y89.95 Base of the Ichimoku cloud

CURRENT LEVEL: Y89.57

SUP 1: Y89.21/28 Spike low 30 Oct, Low 11 Nov
SUP 2: Y88.80/90 Lows 14 Oct, Base of Bollinger band
SUP 3: Y88.02/24 Major low 7 Oct, Low 25 Sep
SUP 4: Y87.81 100% projection of the 21 Sep pullback from 27 Oct high


CABLE
Opened in Asia around $1.6700 and was the first pair to take advantage of the weaker dollar view into early Asian trade, the rate pushing up to session highs of $1.6735 on reported Swiss name buying as it hunted for stop above $1.6710. Rate eased off as yen crosses came under pressure after the Tokyo fix, the rate easing to $1.6685/80. Rate then settled between $1.6690/1.6720 before picking up a fresh bid tone into late Asian trade, the rate breaking above Asian highs into early European dealing, extending the highs to $1.6750. Rate continues to pressure the upside, currently trading around $1.6748. Offers seen placed between $1.6750/55 with stops positioned on a break of $1.6760, which if triggered to expose recent, post BOE Inflation Report highs of $1.6799, with offers noted toward $1.6800. Interim interest also expected to emerge around $1.6780/85. Bids reported at $1.6735/30 ahead of $1.6700, $1.6680.

The focus for cable is the sharp reversal from the $1.6844 high and support at the 21-DMA, now at $1.6515. Studies remain fairly neutral, leaving reaction to the 21-DMA looking key. One warning for the bulls continues to be the recent "hanging man" pattern, which is a reversal signal and could be a sign the Oct/Nov rally is stalling. Euro-sterling briefly pushed over the 21-DMA but with a sharp pullback on Thursday failed to close above there, which is now resistance at stg0.9015. Daily studies have been bouncing along the lows through November and while stg0.8896 remains the low, the main Fibonacci levels are stg0.9093, stg0.9154 and stg0.9214. Initial resistance is at stg0.8970. Bears will continue to focus on the stg0.8896 low.

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, Current top of the daily Bollinger band
RES 1: $1.6767 Minor Fibonacci level

CURRENT LEVEL: $1.6715

SUP 1: $1.6660 5-day moving average
SUP 2: $1.6589 Support line 13 October
SUP 3: $1.6515 21-day moving average, Low 12 Nov
SUP 4: $1.6470/85 61.8% retracement of $1.6240 to $1.6844



OPTIONS AND MORE
FX Option expiries for today's 1500GMT cut

* Euro-dollar; $1.5000, $1.4980, $1.4900, $1.4800
* Dollar-yen; Y90.00, Y91.00
* Aussie; $0.9050

Elsewhere, speculative accounts further increased their net euro long positions as well as their net yen long positions as per Nov 10, according to CFTC data released Friday. The net position in non-commercial futures (ex-options) showed that speculators increased their net euro long to +25,712 contracts, the CFTC said. This compares to last week's net long of +22,191 contracts and the +51,045 contracts seen October 6, which was the largest long since Jan 8, 2008. In the yen, as per Nov 10, spec accounts had a net yen long of +21,878 contracts. This compared to last week's long of +19,832 and the net yen long of +45,615 contracts, seen September 22, which was the largest since Feb 3, when speculative accounts had a net long of +50,518 contracts, the largest of 2009. Spec accounts have maintained a net euro long position since May 5 and a net yen long since July 7. The euro closed at $1.4982 and dollar-yen at Y89.84 Nov 10, which compares to Friday's closing levels of $1.4905 and Y89.67.

DAILY CALENDAR
The calendar for Monday is dominated by central bank speakers, starting at 0715GMT when ECB Governing Council member Ewald Nowotny speaks on economic integration in Europe, in Vienna.

European data starts at 0730GMT with the Bank of France Oct retail sales survey.

At 0815GMT, EU Commissioner for Economic & Financial Affairs Joaquin Almunia speaks, in Vienna.

For the UK, there is no major data due, but at 0815GMT Bank of England Deputy Governor Paul Tucker gives an address at the Belgian Financial Forum, in Brussels.

At 0850GMT, ECB Governing Council member Axel Weber speaks on "Lessons and Consequences from the Financial Crisis" for Germany, in Frankfurt while at 0900GMT, ECB Governing Council member Ewald Nowotny chairs a panel on the euro in times of crisis with Riksbank Deputy Gov. Karolina Ekholm and Bank of Portugal Deputy Gov. Pedro Duarte Neves, in Vienna.

European data at 1000GMT sees the German November DIW as well as the EMU Oct final HICP, which is expected to confirm the flash release.

At 1045GMT, ECB Executive Board member Gertrude Tumpel-Gugerell, Hungarian National Bank Gov. Andras Simor, Poland National Bank President Slawomir Skrzypek and Czech National Bank Gov. Zdenek Tuma all take part on a panel at the Austrian National Bank, in Vienna.

Speakers continue into the European afternoon, at 1315GMT, when ECB Governing Council member Ewald Nowotny presents an award, while at 1330GMT, ECB Governing Council member Ivan Sramko and National Bank of Romania Deputy Gov. Cristian Popa participate in a panel discussion, in Vienna.

US data starts at 1330GMT, when retail sales are expected to rise 0.9% in October. Industry light vehicle sales rose modestly in the month after see-sawing in August and September. Meanwhile, gasoline prices fell slightly and should partly offset gains in other categories. Sales excluding motor vehicles and parts are expected to rise 0.4%.

Also at 1330GMT, the NY Fed Empire State Index is expected to fall to a reading of 29.0 in November, after jumping to 34.57 in October.

This is followed by the weekly MNI Capital Goods Index at 1430GMT, while at 1500GMT, US business inventories are expected to fall 0.8% in September. Factory inventories were already reported down 1.0%, while wholesale inventories down 0.9%.

At 1500GMT, ECB Governing Council member Erkki Liikanen speaks, in Tampere, Finland.

US data for Monday concludes at 1530GMT with the weekly MNI Retail Trade Index.

At 1615GMT, ECB Governing Council member Guy Quaden speaks at the Belgian Finance Forum Conference, in Brussels.

European speakers continue into the evening, at 1800GMT, when Bundesbank Vice President Franz-Christoph Zeitler speaks, in Frankfurt, while at the same time, ECB Governing Council member Ewald Nowotny introduces a dinner discussion on east/west integration, in Vienna.

Also at 1800GMT, Bank of England MPC member Andrew Sentance delivers a speech at Royal Holloway, University of London.

US central bank speakers come late in the day, starting at 1815GMT with Dallas Fed President Richard Fisher who delivers remarks on the economy at the bank's community forum in Tyler, Texas. At 2315GMT, Fed Vice Chair Donald Kohn delivers a speech on policy challenges at Northwestern University in Evanston, Ill.