Tuesday, November 24, 2009

Return of the Tokyo market (following Monday's holiday) prompted strong selling of yen crosses, at the open and through the Tokyo fix, which in turn added to the corrective pullbacks in euro-dollar, cable and the Aussie. Gold initially eased $7 to $1158, bouncing back to $1166, currently around $1164 and remaining buoyed. Repatriation, profit taking seen as the main driver, with concern toward Greece still bubbling away in the background, as well as reports in the FAZ that WestLB requires further cash injections, seen providing a counter to recent risk on tone, and also adding negative weight on the euro.

FOMC Minutes after the European close to be the day's highlight, though most expect no major surprises from the recent line. Germany GDP and Ifo data, BOE MPC at the TSC, EZ Industrial Orders the morning's highlights, with US GDP the early afternoon focus. Sterling outpaced the euro-dollar pullback in Asia with traders suggesting that the MPC could affirm the need for a weak pound for economic rebalancing which could again weigh back on the pound.

Euro-dollar opened Asia around $1.4960 with initial demand lifting the rate up to session highs of $1.4972 ahead of the Tokyo open. The return of Tokyo markets, following Monday's holiday, saw the centre active sellers of yen crosses into the open and through the Tokyo fix. The weight of selling took the rate through the NY base at $1.4957, with triggered stops on the break of $1.4950 providing the weight to take it on to an initial low of $1.4937. Recovery attempts were capped by sell interest between $1.4955/60 before rate pushed down to mark extended session lows at $1.4928.

Further sell interest into early Europe takes rate down to $1.4911 at writing. Support seen placed toward $1.4900, a break here to allow for a deeper move toward $1,4875/70 ahead of $1.4850/40. Resistance now seen toward $1.4930/35, a break here to open a move back toward $1.4965/75 ahead of $1.5000.

After edging up to highs at Y89.20 in the NY session, dollar-yen eased back to close around Y89.00, as euro-yen slipped back to Y133.10, failing to break through the Cloud top at Y133.88. Return of the Tokyo market Tuesday following yesterday's holiday found yen crosses under pressure from the open, further selling coming through at the fix, taking euro-yen back under Y132.80 and dollar-yen to Y88.80. Both pairs consolidated into the afternoon session, before another round of selling as the Nikkei ended at a fresh four-month low. Euro-yen dropped to Y132.45 as dollar-yen moved to Y88.73, with early European dealing seeing lows extended further.

Models and real-money accounts said to be the yen buyers, while semi-official demand is rumoured to come in around Y88.60/50 this morning, importers and investors also looking to buy the dip. Stops noted under Y88.50 and Y88.10, ahead of barrier interest at Y88.00. 200-day moving average back under pressure at Y132.29, a close below still eyed for the first time since May 2009. Trendline support from the October lows also seen cushioning at Y131.93.

Opened in Asia around $1.6610 and initially edged up to mark session highs at $1.6620, as early market moved into risk after the positive close on Wall Street. A returning Tokyo market were strong sellers of yen crosses, the weight of which weighed back on cable to take the rate down to an initial low of $1.6560. Rate recovered to $1.6587 before turning lower again, extending the overnight base to $1.6550. Recovery to $1.6575 proved short lived as early Europe added weight. Rate broke below $1.6550, extending lows to $1.6519, with rate currently trading around $1.6524. Support seen placed toward $1.6500 ($1.6505 76.4% $1.6460/1.6649), a break here to open a deeper move toward $1.6460/50. BOE King at the TSC today with some expectation that he will again refer to a weak pound supporting UK growth. Resistance seen at $1.6550, more at $1.6570/80.

FX Option expiries for today's 1500GMT cut

* Euro-dollar; $1.4900, $1.4980, $1.5000, $1.5050
* Dollar-yen; Y88.00, Y88.50(lge), Y89.50, Y90.00
* Cable; $1.6790
* Euro-Swiss; Chf1.5150
* Aussie; $0.9300
* Dollar-Canada; C$1.0750

EUROPEAN STOCKS: European equity bourses are seen opening lower Tuesday, with spreadbetters calling the FTSE-100 down 33pts, CAC-40 down 32pts and Xetra-DAX down 45pts. The banking sector is in focus this morning after news Lloyds Banking Group (LLOY) will be undergoing a Stg13.5bln rights issue as part of its Stg22.5bln capital raising efforts, with new shares offered at 36p. The firm also managed to raise Stg8.5bln in new debt yesterday, most of which can be converted to equity if the banks finances come under pressure. On the macro front, German IFO at 0900GMT, EMU Industrial Orders at 1000GMT, US GDP data at 1330GMT and the Case-Shiller data at 1400GMT, will all be watched for direction today.

The European day starts a full calendar session at 0700GMT, with the release of German detailed Q3 data, followed by French housing starts/permits and French November manufacturing sentiment at 0745GMT.

French data continues at 0750GMT, with the release of French October consumer spending. At 0800GMT, Spain Oct PPI data is released.

At 0900GMT, Germany Nov IFO business sentiment is released, the main focus for European players in the morning session

In the UK, at 0930GMT, Q3 preliminary business investment data is released, along with the October BBA Loans For House Purchase data.

At 0945GMT, Bank of England Gov. Mervyn King is at the House of Commons Treasury Committee, giving evidence on the November inflation reports. BOE MPC Members Paul Tucker, Paul Fisher, Adam Posen and Andrew Sentance also to attend.

Additionally, BOE Gov. King and MPC Member Andrew Sentance issue their Annual Report.

At the same time, German Chancellor Angela Merkel gives a speech at the BDA conference, in Berlin. AT 1000GMT, EMU Sep industrial new orders data is released, followed at 1230GMT by German Economics Minister Rainer Bruederle speaking in Berlin

A full US calendar gets underway at 1245GMT, when the 21-Nov week ICSC-Goldman Store Sales data is released.

At 1330GMT, US third quarter revised GDP, Chain Price Index data are released. Third quarter GDP is expected to be revised down to a 2.8% pace in the second estimate. The key factors are expected to be a wider trade gap and more inventory drawdown, as well as slower PCE growth than previously expected. The chain-price index is expected to be unrevised at +0.8%.

Back in Europe, at 1400GMT, the BNB Nov business sentiment is released.

Further evidence of the state of the US housing market is released at 1400GMT, when the Sept 09 S&P/Case-Shiller Home Price Index and at 1500GMT, when the Sept FHFA Home Price Index is out.

Further data is released at 1500GMT, with the November Consumer Confidence data and the Richmond Fed Manufacturing Index. Consumer confidence is expected to fall to a reading of 47.0 in November after backing up to a 47.7 reading in October.

Also at 1500GMT, FDIC Chair Sheila Bair holds a press briefing on the Q3 bank and thrift earnings in Washington.

Back in the UK, at 1535GMT, BOE Gov. King gives further testimony to Parliament, this time to the House Of Lords Economic Affairs

At 1730GMT, SNB President Jean-Pierre Roth holds speech at the International Center for Monetary and Banking Studies, in Geneva

Big release for the bond markets at 1900GMT in the US, when the latest FOMC Meeting Minutes are released. Last releases data is at 2200GMT, when the 22 Nov week ABC News Survey of confidence is released.


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