Tuesday, November 17, 2009

MORNING FX

BRIEFING
The dollar remained under pressure into early Asian trade, the US unit having been given brief respite from ongoing pressure by an unusual strong dollar comment from Fed Bernanke, euro-dollar dropping back from $1.4975 to $1.4880, but this move proved short lived as US yields remained low and Bernanke added dovish comments, with euro-dollar going on to post highs at $1.5017 ahead of this session's close. Rate opened Asia at $1.4972 with initial buying failing to lift it back above $1.5000, with Aussie dollar also opening firm, taking an initial boost from the release of RBA Minutes but quickly reversed as comments were viewed less hawkish than had been expected. Rate dropped from $0.9378 to $0.9324. Cable saw similar opening moves, trading up to $1.6846 (off NY rally highs of $1.6879) before slipping back on the Aussie turnaround. Tokyo fix saw currencies sold but Toshin demand provided a cushion to allow dollar-yen to straddle Y89.00 in a range of Y88.92/89.17. UK inflation data at 0930GMT provides early focus, with US PPI, TICS, Cap.Ut/IP and NAHB data this afternoon's highlights.

EURO
Dramatic moves during the NY afternoon Monday with the euro dropping from around $1.4975 to $1.4880 as Fed's Bernanke made a comment on a strong-dollar, but additional comments reiterated the recent dovish tome which saw rate rally back, pushing up to post fresh intraday highs at $1.5017. Rate opened the Asian session back at $1.4975 with early model demand lifting it on to $1.5000 but reported sovereign supply provided decent resistance. The negative reaction to the RBA Minutes took the shine off risk on trades, Asian equity markets not following Wall Street's late rally, with euro-dollar slipping back to initial lows at $1.4946, stretching on late in the session to $1.4935 ($1.4932 61.8% $1.4880/1.5017). Rate was lifting back into the European session on reported Asian sovereign buys, recovering to current level around $1.4960 (38.2% $1.5000/1.4935). A move above here to allow for a challenge on $1.4975/85 ahead of $1.5000. Stronger offers said to remain in place between $1.5015/20 ahead of $1.5050/65. Support $1.4935/30, $1.4915/10 ahead of $1.4880 (seen pivotal intraday).

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 $1.4732.

RES 4: $1.5235 2% moving average envelope
RES 3: $1.5163/82 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

SUP 1: $1.4890 21-day moving average
SUP 2: $1.4788 61.8% retracement of $1.4628 rally, 1% MAE
SUP 3: $1.4732 Support line 17 Aug
SUP 4: $1.4628/80 Low 3 Nov, Base of Bollinger band





YEN
After slipping five-week lows at Y88.75 in the US session Monday, dollar-yen closed around Y89.05, as euro-yen ended towards the bottom of the range at Y133.30. Asian dealing found yen pairs notching early highs, dollar-yen moving to Y89.17 as the cross edged up to Y133.58, before Tokyo names stepped in to sell the currencies into the fixing. Dollar-yen dropped back to Y88.95 as euro-yen slipped to Y133.10, before a period of consolidation into the afternoon session. Dollar-yen bids said to come in under Y88.80, with a deeper move set to expose a move towards the October lows just ahead of Y88.00. Euro-yen stops reported under Y133.90, which if triggered would expose further slippage within the Ichimoku Cloud, the base of which come in today at Y131.74. Traders are noting a shift in sentiment over recent sessions, beginning to see yen demand from a variety of names, including long-term models cutting yen shorts and real-money accounts taking an interest in the Japanese currency on a reweighting basis. Spec names are also eyeing yen inflows from increasing Japanese share issuance.

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 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 Y89.60. The daily studies are in neutral territory in euro-yen and not giving much direction 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 Y131.70.

RES 4: Y92.32/53 Failure highs 27 Oct, 21 Sep, 100-day moving average
RES 3: Y91.31 High 4 Nov
RES 2: Y90.55/65 21, 55-day moving average
RES 1: Y89.95 Base of the Ichimoku cloud

SUP 1: Y88.65/80 Base of Bollinger band, Lows 14 Oct, 16 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 the Asian session around $1.6825, off NY session rally extension highs of $1.6879. Initial pressure on the dollar into the Asian session allowed rate to push higher again, though this time the move up was restricted to $1.6846. The early risk on tone quickly faded as Asian equity markets moved into negative territory, ignoring the late Wall Street rally, and the Aussie reacted negatively to the RBA Minutes, seen less hawkish than had been hoped for. Cable dropped back to $1.6798. Rate was recovering ahead of the European open, with momentum increasing into the session to take rate through the overnight high and on to $1.6860 (76.4% $1.6879/1.6798). Move seen driven by reported euro-sterling sell interest, suggested to be linked to M&A interest. The cross opened around stg0.8896, off NY lows of stg0.8873, edging to mark highs at stg0.89075 before slipping lower, extending intraday lows to stg0.8878. Bids placed toward stg0.8870, a break exposes stg0.8845/40. Resistance stg0.8905/10, stg0.8940/45. Cable offers $1.6860, $1.6880, $1.6900. Bids $1.6830/20, $1.6800, stops $1.6795/90.

Reversals in cable held above the 21-DMA, now at $1.6550 and while studies remain fairly neutral, holding above there is looking key. Bulls eye the top of the daily Bollinger band, which is a rising target and currently at $1.6900. Break over there risks high/lows at $1.7044/52, while initial supports are $1.6710 and $1.6626.

RES 4: $1.7240 100% projection of first October upwave
RES 3: $1.7044/52 High 5 August, November 2005 low
RES 2: $1.6900 Current top of the daily Bollinger band
RES 1: $1.6879 High 26 Nov

SUP 1: $1.6710 5-day moving average
SUP 2: $1.6626 Support line 13 October
SUP 3: $1.6550 21-day moving average
SUP 4: $1.6515 Low 12 Nov






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

* Euro-dollar; $1.4950, $1.4955, $1.4800
* Dollar-yen; Y89.75, Y90.10, Y90.15, Y90.20, Y90.35
* Euro-yen; Y131.00
* Aussie; $0.9355, $0.9400


IMF/Gold: The sale of another 2 metric tons of gold was announced Monday night, this time to the central bank of Mauritius. Worth about $717 mln and adds to the 200 metric tons already sold to the Reserve Bank of India. A total of 403.3 tons being sold 'in a phased manner over time.' See the text repeated on the MNI main wire.

DAILY CALENDAR
The US visits to Asia continue with President Obama meeting the Chinese Premier today. Also, at 0700GMT, IMF Managing Director Dominique Strauss-Kahn holds a press conference in Beijing at the conclusion of their China visit.

At 0800GMT, ECB Governing Council member Ewald Nowotny introduces a morning session, at the conference in Vienna, which is followed at 0830GMT when ECB's Yves Mersch and Belgian Finance Minister Didier Reynders speak at the 5th Economic Forum Belgium-Luxembourg-Arab Countries, taking place in Brussels.

At 0845GMT, ECB Governing Council member Ewald Nowotny chairs a panel on Financial Market Stability in Central and Eastern Europe. UK data sees October CPI data at 0930GMT.

Having dropped to the lowest level in five years, annual CPI is expected to start creeping up from October with forecasts of 0.1% m/m, 1.4% y/y as favourable base effects go into reverse. This will be the first rise since February.

The EMU Sep trade balance is due at 1000GMT, US events start at 1030GMT when San Francisco Fed President Janet Yellen delivers a speech on linkages between monetary and regulatory policies to the Institute of Regulation & Risk in Hong Kong.

At 1200GMT, ECB's Guy Quaden speaks at the 5th Economic Forum Belgium-Luxemburg-Arab Countries, in Brussels.

US data starts at 1245GMT with the weekly ICSC-Goldman Store Sales, which is followed at 1330GMT by PPI, at 1355GMT by the weekly Redbook Average, at 1400GMT by the weekly TICS data and at 1430GMT by Industrial Production and Capacity Use data.

Producer prices are expected to rise 0.5% in October on a rise in energy prices following sharp movements in recent months. Gasoline pump prices were reported down slightly, but crude prices rose. Core PPI is expected to rise 0.1%. The 2010 model year vehicles should begin to appear in the data.

Industrial production is expected to rise 0.4% in October after posting a third straight increase in September. Manufacturing production is expected to posted another increase. Factory payrolls fell 61,000 in the month, but auto production jobs rose 5,000. The factory workweek rose to 40.0 hours, while the ISM production index rose to 63.3. Capacity utilization is forecast to rise only slightly to 70.7%.

At 1430GMT, ECB Executive Board member Juergen Stark speaks at a Business Process Management Conference in Frankfurt.

At 1500GMT, Richmond Fed President Jeffrey Lacker delivers a speech on the economic outlook to the Virginia House Appropriations Committee in Richmond.

Back in Europe at 1600GMT, ECB Executive Board member Gertrude Tumpel-Gugerell speaks on 10th anniversary of the euro, while at 1700GMT, ECB President Jean-Claude Trichet introduces Eurogroup Chairman Jean-Claude Juncker at European Banker of the Year event, in Frankfurt.

At 1755GMT, Cleveland Fed President Sandra Pianalto delivers a speech to the Annual Ohio Housing Conference in Columbus.

Later US data sees the 1800GMT NAHB Housing Market Index and the 2200GMT release of the weekly ABC

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