Wednesday, November 18, 2009

18 Nivember 2009

A fairly quiet Asian session with most reports suggesting that what activity there was led by moves in gold. The yellow metal managed to post fresh highs at $1144.70, the move giving euro-dollar and cable an early lift, the former trading up to $1.4900, the latter to $1.6825. Reversal in gold back to $1136.50 (traders suggest stops under $1136) allowed both pairs to ease back, the failure to trigger reported stops above $1.4900 prompting spec longs to cover back. One trader noted that euro-dollar trade was contained by euro-yen sales and euro-sterling demand, though flows reported to have been relatively light. Aussie saw an early session high of $0.9319 only to meet strong headwind sales out of the Tokyo fix, the rate slipping back to lows of $0.9266 before Asian sovereign demand emerged, along with custodial buying, to lift it back to $0.9290. Dollar-yen trade was contained by Y89.17/55, with euro-yen tracking euro-dollar moves. BOE Minutes the morning highlight, details of who voted for the stg25bln increase in QE the focus. Canadian and US inflation data at 1200/1330GMT

Euro-dollar opened Asia around $1.4870, having recovered off NY session lows at $1.4807 after reportedly meet strong option related demand placed ahead of the well reported $1.4800 barrier level ($1.48/1.51 dnt structure, which rolls off Friday, seen containing the rate). The early move up in gold provided risk trades with an early lift, euro-dollar edging up to $1.4890, where it met Swiss name supply, but was able to eventually stretch on to $1.4894. Failure to trigger reported stops above the figure, and with the easing back in gold (off fresh highs of $1144.70), allowed rate to slip off highs but was holding firm levels ahead of the European open. Rate currently trades around $1.4890. Offers seen placed to $1.4900 with those stops remaining in place, a break to allow for a move on toward $1.4910/15 ahead of $1.4930/35. Support seen at $1.4860/50 (Asia low $1.4858), more toward $1.4840, $1.4825 with stronger interest remaining in place on approach to $1.4800.

Euro-dollar faded ahead of the highs at $1.5060/64 and the subsequent pullback is holding around the 5 & 21-DMAs at $1.4885 and $1.4915. The 21-DMA remains in focus as the daily studies turn weaker and momentum risks a bearish cross of the zero line. Close under $1.4885 would weaken the outlook and have bears targeting the 17 August support line at $1.4742, while $1.5047/64 highs remain the focus for bulls.

RES 4: $1.5230 2% moving average envelope
RES 3: $1.5163/89 76.4% of decline from July 2008 high, Res line 3 June
RES 2: $1.5090 Current Bollinger band top
RES 1: $1.5047/64 High 11 Nov, Double-day high 23, 26 October

SUP 1: $1.4885 21-day moving average
SUP 2: $1.4788 61.8% retracement of $1.4628 rally, 1% MAE
SUP 3: $1.4742 Support line 17 Aug
SUP 4: $1.4628/80 Low 3 Nov, Base of Bollinger band

Dollar-yen and yen crosses opened with a bid tone into early Asia only for sentiment to reverse as supply emerged into the Tokyo fix. Rates drifted lower during the session as Asian equity markets traded softer, despite the positive close on Wall Street. Trade in dollar-yen was contained within a relatively tight range of Y89.09/37, though traders suggested this exaggerates real activity with most early trade contained by Y89.20/30, later between Y89.15/20. Euro-yen saw early highs of Y133.04 before slipping lower to Y132.59 with flows described as light. Dollar-yen currently trades around Y89.17, euro-yen around Y132.80. Dollar-yen bids noted between Y88.80/70 with stops below. Offers Y89.40/60 with CTA stops reported on a break of Y89.70. In euro-yen, bids seen to Y132.45 (NY low), stronger around Y132.20 ahead of Y132.00. Resistance seen at Y133.00/10, Y133.25 ahead of Y133.50/60.

Dollar-yen studies remain soft, although they are now testing oversold levels as the market tests the Y88.02 lows. Any break there will get bears focused on the major low of Y87.12, although there is also a trendline from April 1995 at Y87.58. Initial resistance is Y89.50. In euro-yen, the daily studies weakening, although in neutral territory as the cross slips back into the Ichimoku cloud (top at Y133.90). This leaves the cross searching for direction with next resistance nearby at Y134.80. Downturns face the 200-DMA and cloud base at Y131.75/90.

RES 4: Y92.32/53 Failure highs 27 Oct, 21 Sep, 100-day moving average
RES 3: Y91.31 High 4 Nov
RES 2: Y90.35/55 21, 55-day moving average
RES 1: Y89.90 Base of the Ichimoku cloud

SUP 1: Y88.50/73 Base of Bollinger band, Low 17 Nov
SUP 2: Y88.02/24 Major low 7 Oct, Low 25 Sep
SUP 3: Y87.81 100% projection of the 21 Sep pullback from 27 Oct high
SUP 4: Y87.12 Major lows Dec/Jan

Cable opened Asia around $1.6805, with the early rise in gold providing risk trades with a lift taking cable to highs of $1.6835. Reversal in gold, as well as cross yen sales through the Tokyo fix saw cable ease back, breaking under the figure before picking up fresh demand interest that cushioned the move at $1.6783. Rate then settled into a $1.6787/07 range ahead of the European open, with fresh demand into the session taking rate to extended intraday highs of $1.6840. Rate currently trades around $1.6825. BOE MPC Minutes to be released at 0930GMT the morning's highlight, with focus on who voted for the stg25bln increase in QE (with special attention on King's vote). Offers seen placed toward $1.6850 ($1.6845 76.4% $1.6873/1.6755), a break above to open a move back toward $1.6870/80 ($1.6873 Tuesday high/$1.6879 NY high Monday). Support seen toward $1.6800, a break to open a deeper move toward $1.6785/75 ahead of $1.6755/50.

Reversals in cable have held above the 21-DMA, now at $1.6570 and while studies are starting to weaken, holding above there is looking key. Bulls eye the top of the daily Bollinger band, which is a rising target and currently at $1.6930. Break over there risks high/lows at $1.7044/52, while initial supports are $1.6750 and $1.6663. Euro-sterling reversed from the 21-DMA, which remains main resistance up at stg0.8985 and has now pushed below the 200-DMA of stg0.8870 to test the 100-DMA at stg0.8833. Daily studies have been bouncing along the lows through November but bears will be encouraged by the latest break lower and want to turn focus to Fibonacci levels at stg0.8822 and stg0.8786.

RES 4: $1.7240 100% projection of first October upwave
RES 3: $1.7044/52 High 5 August, November 2005 low
RES 2: $1.6930 Current top of the daily Bollinger band
RES 1: $1.6879 High 26 Nov

SUP 1: $1.6750 5-day moving average
SUP 2: $1.6663 Support line 13 October
SUP 3: $1.6570 21-day moving average
SUP 4: $1.6515 Low 12 Nov

FX Option expiries for today's 1500GMT cut

* Euro-dollar; $1.4800, $1.4830, $1.4950, $1.5000
* Dollar-yen; Y88.75, Y89.00, Y89.25
* Cable; $1.6600, $1.7030
* Aussie; $0.9300, $0.9350, $0.9450

EUROPEAN STOCKS: European equity bourses are seen opening higher Wednesday, with spreadbetters calling the FTSE-100 up 6pts, CAC-40 up 24pts and Xetra-DAX up 29pts. Basic materials stocks are watched for strength initially today with the commodity market stronger overnight, and earnings results from Air France-KLM (AF), Ahold (AHOE) and Land Securities (LAND) will be eyed for movement. On the macro front, the BoE minutes from the November meeting are due at 0930GMT, with UK CBI at 1100GMT, US Mortgage Application at 1200GMT, US CPI, Housing Starts and Building Permits all at 1330GMT. That said, Daniel Roy, equity strategist at Newedge does note the US CPI figure today are likely to be of little relevance to the equity market, with the housing data having more of an impact, although this will also be somewhat subdued because of currently slow nature of the market.

European events for Wednesday start at 0840GMT when ECB President Jean-Claude Trichet gives the keynote address at a conference taking place during European Finance Week, in Frankfurt ECB Sep current account data is due shortly after, at 0900GMT.

The main focus for the UK is the release of the minutes of the November MPC meeting, at 0930GMT.

The Bank of England Governor noted a "range of views" on the MPC suggesting that the November minutes could reveal a split vote on extending quantitative easing. Indeed, the last split vote was in August ahead of the release of the August Inflation Report. Moreover, the fact that the MPC expanded QE at the smaller pace of Stg25 billion could suggest that a compromise was made. In theory a case could have been made for no further extension in QE and MPC member Sentance is the most likely candidate to be in this camp. A case for expanding QE by more than Stg25 billion could also have been made and Governor King and MPC member Miles currently appear to be the most activist on the team.

Hence, the first three-way split of the year is feasible. In any case, a debate on all three options is likely to have been made. As for interest rates, the vote on keeping rates at the historically low 0.5% is set to have been unanimous. However, the BoE projections highlighted that markets appeared to have got ahead of themselves yet again by pricing in over 100bp rate hikes in 2010. Interest rates then look set to remain unchanged for longer than has been priced in.

EMU Sep construction production data is due at 1000GMT, while back in the UK at 1100GMT, the November CBI Industrial Trends Survey is released.

US data starts at 1200GMT with the weekly MBA Mortgage Application Index, which is followed at 1330GMT by CPI and Housing Starts, Building Permits data.

Analysts expect October CPI to rise 0.2%, though gasoline pump prices fell slightly. Core CPI is expected to rise 0.1%. New model year vehicles should begin to enter the CPI data this month as well, while the pace of housing starts is expected to rise to a 600,000 annual rate in October after holding virtually steady over the last four months.

At 1400GMT, Treasury Secretary Timothy Geithner speaks at the Small Business Financing Forum in Washington, while Riksbank Deputy Governor Lars Nyberg delivers a speech on the financial crisis, in Stockholm.

Shortly after, at 1415GMT, St. Louis Fed President James Bullard speaks on the economy and monetary policy at a Commerce Bank Economic Breakfast. Back in Europe, at 1500GMT, Bundesbank Board member Thilo Sarrazin speaks about Germany after the federal elections, in Cologne.

The weekly EIA Crude Oil Stocks data is due at 1530GMT. Later on, at 1730GMT, Swiss National Bank Board member Philipp Hildebrand speaks on "Policy Implications of the Financial Crisis", in Geneva.


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