Monday, January 18, 2010

MORNING FX
BRIEFING
The dollar saw a subdued start to the new week in Asia, with light flows seen ahead of the US holiday weekend. Dollar-yen was trading around Y91.00, modestly higher from Friday's close and near the top of the session trading range. Dealers said early demand for yen crosses lifted the pair to the high but that fizzled out when Japanese stocks sank into the red, and caused risk appetite to wilt. Euro-dollar was knocked to early lows of $1.4335 (NY low $1.4336) as market reacted to an Ambrose Evans-Pritchard article in the Telegraph suggesting the ECB has begun to look at the legal ramifications if Greece were to leave the EU.

Rate quickly recovered back to opening levels around $1.4370/75 with trading conditions reported to be thin due to this afternoon's US holiday. Traders also noted a decent Chf1.0290 offer in dollar-Swiss aiding euro-dollar support. Sterling made decent gains overnight, boosted by positive M&A (France GDF/UK International Power) and better than expected RightMove house data, with euro-sterling trading back under its 200 day m/a. Very light data calendar today and US holiday.

EURO
Euro-dollar opened Asia around $1.4370, getting an early lift to $1.4374 before coming under pressure as market reacted to an Ambrose Evans-Pritchard article in the Telegraph suggesting that the ECB had begun to look at the legal ramifications if Greece were to leave the EU. Thin conditions (US holiday) allowed light early flows to press the rate down to $1.4335 (NY low $1.4336), with buyers placed around that NY low providing support. Initial recovery to $1.4350 picked up further sell interest from momentum and CTA accounts, with added sales of euro-sterling, allowing rate to retest lows before meeting stronger demand interest.

Rate recovered through its opening levels, extending to $1.4388 in Asia, $1.4395 into early Europe ($1.4398 NY high). Rate currently trades around $1.4385. Offers remain in place toward $1.4400, a break here to open a move toward $1.4430 ahead of $1.4445/50. Support remains at $1.4335/30, more toward $1.4300. Traders highlight the 200 day m/a at $1.4288 (some have this at $1.4275) as key support, with further demand interest seen placed behind at $1.4260/50 and $1.4220.


RES 4: $1.4790 61.8% retracement of December decline
RES 3: $1.4669/81 Former bear-flag base, 100, 55-DMA, 50% of Dec decline
RES 2: $1.4572/80 38.2% retracement of Dec decline, High 13 Jan
RES 1: $1.4447/50 Low 14 Jan, 5-day moving average

CURRENT LEVEL: $1.4382

SUP 1: $1.4339 76.4% retracement of 8 Jan recovery
SUP 2: $1.4287 200-Day moving average, Support line from 22 Dec
SUP 3: $1.4218 Low 22 Dec
SUP 4: $1.4118 38.2% retracement of March/Dec rally


YEN
Early euro-yen sales were prompted as the single European currency reacted to a negative article on Greece in the Telegraph, led cross yen and dollar-yen lower in initial trade, dollar-yen touching a low of Y90.70, while euro-yen triggered stops under Friday's low at Y130.30 to touch Y130.10. Weak Asian equities also added to the early negative tone. As equity markets steadied so euro-yen recovered. moving back up in tandem with euro-dollar to Y130.94 before meeting decent sell interest placed ahead of Y131.00. Rate dropped back to Y130.50 before picking up fresh demand interest into early Europe to edge it back toward the recent highs.

Dollar-yen recovered to Y91.07, holding around Y91.00 into early Europe. Euro-yen offers remain around Y131.00, a break above to open a move toward Y131.25/35 ahead of Y131.70/80. Support Y130.10/00, stops through Y129.90. Dollar-yen offers Y91.10/20, more between Y91.35/55. Support Y90.70/50 ahead of Y90.35/15. Equities continue to be seen as the main driver with attention also on JAL's expected bankruptcy and DPJ political concerns.


RES 4: Y94.22 50% projection of 26Nov/4Dec rally from 5 Jan
RES 3: Y93.78 High 7 Jan
RES 2: Y93.20 200-day moving average
RES 1: Y91.90/20 21-day moving average, Tenkan line of Ichimoku cloud

CURRENT LEVEL: Y90.85

SUP 1: Y90.60 Low 15 Jan
SUP 2: Y90.36 38.2% retracement, 100-DMA
SUP 3: Y90.00 55-day moving average
SUP 4: Y89.30 50% retracement of the 'December' rally


CABLE
Opened Asia around $1.6270 and eased to session lows of $1.6235 as rate tracked early pressured sales of euro-dollar. Cable recovered as euro-sterling broke under its 200 day m/a at stg0.8845, strong sales of the cross taking this rate down to stg0.8803 in Asia and allowing cable to rally to $1.6320. The cross rallied back to stg0.8830, as cable dropped back to $1.6275/70, but sterling again picked up fresh demand to take cable back to retest $1.6320 in early Europe (extending highs to $1.6335), while the cross sat back heavily on stg0.8800.

Sterling demand overnight seen from system accounts, with further sterling positive M&A flows (France GDF Suez making a stg5bln approach for UK International Power) also prompted. UK RightMove release of stronger than expected housing data also aided the pound's buoyancy overnight. Cable offers reported in place at $1.6345 (Europe high Friday), with further interest noted close behind between $1.6355/65. Support seen at $1.6300 ahead of $1.6280. Euro-sterling demand remains ahead of stg0.8800, with stops reported on a break below.


RES 4: $1.6479 61.8% retracement of the decline from 16 Nov
RES 3: $1.6410 High 16 Dec
RES 2: $1.6398 61.8% retracement of December decline
RES 1: $1.6356/81 Fibonacci levels, 55-day moving average

CURRENT LEVEL: $1.6314

SUP 1: $1.6211 Low 15 Jan
SUP 2: $1.6193 Highs 11 & 12 Jan
SUP 3: $1.6085 21-day moving average
SUP 4: $1.5896 Low 7 Jan

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