Thursday, January 28, 2010

EURO WEAKNESS CONTINUES

BRIEFING
Euro weakness was the initial focus in Asia, as euro-dollar fell through the $1.4000 level to a $1.3935 low. Euro-dollar last traded below the psychological $1.4000 level on July 8 9$1.3838). Stops below $1.3985 and $1.3950 were taken out mid-morning, the pair hitting $1.3930 lows, bouncing back sharply to $1.3970/80 before stabilizing. It was trading back slightly above the $1.4000 level late in the session at $1.4005.

The dollar initially lost steam against the yen, ending the New York session around the Y90.00 level, beginning Tokyo around Y89.86 and winding up the morning around Y90.26. Euro-yen was generally well bid through the session, risk boosted by positive stocks with move to Y126.73 extending dollar-yen gains to Y90.40. The Kiwi barely budged after the Reserve Bank announced it would keep rates at a record low 2.5% and made no change to its post-meeting economic statement, though did manage to post an eventual high at $0.7107. Cable buoyed as euro-sterling broke under support at stg0.8650, rate holding around $1.6200. Further UK oil company demand expected.

EURO
Opened Asia around $1.4020, off NY lows at $1.3993, and edged up to $1.4040 in early trade on euro-yen led demand. Model and macro funds provided the main counter to the early rise, easing the rate back to retest the NY lows. News of further N.Korea artillery action off the coast of S.Korea, along with reported comments from PBOC official warning of the dangers of dollar carry trades, provided the catalyst for further selling with triggered stops through $1.3985 providing the weight to trigger option knock out levels at $1.3990, $1.3980, $1.3970, $1.3950 and $1.3930.

Rate touched $1.3930 before snapping back to $1.3965 bid in a breath. Rate recovered back above $1.4000 to $1.4020/25 before settling between $1.4005/20 ahead of Europe. Rate currently trades around $1.4020 in early European dealing. Asian talk of Asian sovereign demand aiding the recovery may have placed blame on the wrong person, some linking interest to a monetary authority, adding that same name may have sell interest now above the market. Offers $1.4020/25, $1.4040/50. Support $1.3985/80, $1.3950 and $1.3930.

RES 4: $1.4447 Low 14 Jan
RES 3: $1.4310/30 21, 200-day moving average
RES 2: $1.4195/18 High 25 Jan, Low 22 Dec
RES 1: $1.4090 5-day moving average

CURRENT LEVEL: $1.4016

SUP 1: $1.3960 Current base of the daily Bollinger band
SUP 2: $1.3902 Minor support line 3 Nov
SUP 3: $1.3801/25 50% retracement of March/Dec rally, Low 22 June
SUP 4: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June


YEN
Dollar-yen and cross yen opened Asia on a bid tone, with markets upbeat following Obama's State of the Union speech (no bank bashing seen boosting risk). Dollar-yen pushed to a high of Y90.40, from opening lows around Y89.88, with offers placed toward Y90.50 seen providing a cap.

Euro-yen pushed to an early high around Y126.45 from the low Y126's, dropping back to Y125.90, as euro-dollar fell back on triggered option stops, before recovering back to post highs at Y126.73 as risk trades remained in favour on positive equity markets. Yen retains a soft feel into early Europe, dollar-yen currently trading around Y90.35, euro-yen at its overnight highs of Y126.73. Dollar-yen offers to Y90.50, stops on break of Y90.60. Support Y90.00/89.90. Euro-yen offers Y126.80, Y127.40/50. Support Y126.00/125.90.

RES 4: Y92.65/85 High 11 Jan, 200-day moving average
RES 3: Y91.87/05 Highs 21 Jan, 14 Jan
RES 2: Y91.40/50 21-day moving average, Kijun line
RES 1: Y90.55 Recent highs, Tenkan line of the Ichimoku cloud

CURRENT LEVEL: Y90.28

SUP 1: Y89.14/20 Low 27 Jan, Top of the Ichimoku cloud
SUP 2: Y88.95 Low 18 Dec
SUP 3: Y88.55 Base of the Ichimoku cloud
SUP 4: Y88.24 61.8% retracement of the 26 Nov rally


CABLE
Opened Asia around $1.6175 and initially edged up to $1.6180 before dropping back to retest NY pullback lows at $1.6137 as rate tracked euro-dollar's severe drop as option levels were triggered. Cable posted a low at $1.6135 before snapping back, the recovery aided as the euro move allowed euro-sterling to break support at stg0.8650 (taking out the option barrier there). The cross posted a low at stg0.8632. Cable rallied back to post session highs at $1.6230, the recovery in euro-sterling back to stg0.8650 then weighing back to ease rate back to $1.6170 ahead of the European open.

Rate slowly recovered , breaking the overnight highs into early Europe to extend move to $1.6240, just short of Wednesday's highs at $1.6245. Rate retains a firm tone around $1.6235, the cross currently around stg0.8638. Cable offers seen placed between $1.6240/50, a break to open a move toward $1.6270/80 with stops above. Talk that Tullow Oil raising of stg1bln Wednesday to be converted to dollars to fund African expansion which could counter ongoing UK oil company dividend demand interest.

RES 4: $1.6459/79 High 19 Dec 61.8% retracement of the 16 Nov decline
RES 3: $1.6415 Current top of the daily Bollinger band
RES 2: $1.6295 100, 55-day moving average
RES 1: $1.6215 200-day moving average

CURRENT LEVEL: $1.6184

SUP 1: $1.6077 Low 22 Jan
SUP 2: $1.6061 Support line from 30 Dec
SUP 3: $1.6030 76.4% retracement of the $1.5898/1.6459 rally
SUP 4: $1.5898/30 Low 7 Jan, Current base of daily Bollinger band

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