Tuesday, February 2, 2010

Australia Keeps Interest On Hold

Briefing
The greenback was narrowly mixed in the Asia, ending close to the middle of trading ranges against the majors as the RBA surprised markets as it left rates on hold (+25bp had been widely forecast). The Aussie fell sharply from around $0.8925 to a low of $0.8823 almost immediately after the RBA decision, extending the low to $0.8782. The move triggered a broad unwinding in risk positions, and euro-dollar came unhinged along with that, falling to a $1.3886 low after spending most of the morning between $1.3908/36.

However, the pair rallied to $1.3925 ahead of the European open. Aussie-yen fell below Y80.00 for a low of Y79.65, and that initially triggered a retreat in dollar-yen. Dollar-yen was at Y90.80 in early Europe, having been as low as Y90.58, with some speculative demand in the recovery seen prompted by Japan Kamei comments suggesting Japan Post diversification. Euro-yen had lifted to an early high of Y126.61 before it too fell back on the RBA decision, dropping to Y125.86. Euro recovery in early Europe sees rate back at Y126.40.

Euro
Euro-dollar opened Asia around $1.3930 and got an early lift from cross yen demand taking it up to session highs of $1.3937. Decent sell interest placed ahead of $1.3940 capped the move and saw it ease back to $1.3910. The RBA's surprise decision to keep rates unchanged (most had forecast a hike of 25bp) prompted a paring back in risk positions with euro-dollar dropping down to $1.3886. Rate recovered on the back of reported European demand, lifting back above the figure ahead of the European open and extending move to retest earlier highs at $1.3937, before again meeting that same resistance from offers placed ahead of $1.3940.

A tightening in Greek bonds to German bunds seen aiding euro's buoyant tone, with traders also reporting decent buys seen from a US investment house in Asia. Tech traders have suggested that rate needs to move above $1.3940 to boost recovery hopes going forward, following a 5-day series of lower highs. Rate currently trades around $1.3926. A break above $1.3940/50 to open a move toward $1.3988 (Jan 28 high) with sell interest noted from here and extending toward $1.4000.

RES 4: $1.4240 21-day moving average
RES 3: $1.4195/18 High 25 Jan, Low 22 Dec
RES 2: $1.4032 Low 21 Jan
RES 1: $1.3945 5-day moving average

CURRENT LEVEL: $1.3926

SUP 1: $1.3853 Low1 Feb
SUP 2: $1.3825 Low 22 June
SUP 3: $1.3790/01 Current Bollinger band base, 50% of March/Dec rally
SUP 4: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June


Yen
Dollar-yen failed to break out of its recent range highs overnight. The pair traded up to Y90.92 (recent high Y90.93) on the back of a Financial Times report quoting Japan's banking minister Kamei as saying Japan Post should buy more corporate bonds and US Treasuries rather than JGBs. However the strength was short lived as the RBA kept rates on hold despite an expectation of a hike.

This saw some Aussie-yen sales hit the market and drag the dollar-yen down to Y90.60 area coupled with some euro-yen sales (down to Y125.86). Traders say that there is still good resistance at Y91.00 for the time being although stops are said to be building behind. Support is seen at Y90.55 previous breakout point and treble bottom on the intra-day chart since the break higher.

RES 4: Y92.65/75 High 11 Jan, 200-day moving average
RES 3: Y91.87/05 Highs 21 Jan, 14 Jan
RES 2: Y91.50 Kijun line of the Ichimoku cloud
RES 1: Y90.93/10 Recent highs 29 Jan/2 Feb, 21-day moving average

CURRENT LEVEL: Y90.76

SUP 1: Y89.14/35 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 $1.5958 with rate restricted to an early range of $1.5940/65 before pushing up to post session highs at $1.5975 before dropping back to $1.5920 as markets reacted to the surprise no rate change by the RBA. The move overtook euro-dollar's negative reaction to the decision, allowing euro-sterling to recover off early dip lows of stg0.87095, rallying back to stg0.87405.

Cable recovered, meeting resistance ahead of $1.5950 in Asia before getting a lift on to $1.5955/60 into early Europe before again dropping back, finding support this time around $1.5925. Rate currently trades around $1.5945. Offers reported in place between $1.5975/80 with stops above. Support remains at $1.5920 ahead of $1.5900.

RES 4: $1.6235/75 200, 55 & 100-day moving average
RES 3: $1.6150 21-day moving average
RES 2: $1.6040/80 5-day moving average, Low 22 Jan
RES 1: $1.5986 Intra-day gap top from 29 Jan

CURRENT LEVEL: $1.5939

SUP 1: $1.5833/50 Low 30 Dec, Low 1 Feb, Base of daily Bollinger band
SUP 2: $1.5770/85 Low 28 Sep, 2% moving average envelope
SUP 3: $1.5749 38.2% retracement of $1.3659 to $1.7041
SUP 4: $1.5708/21 Low 13 Oct, High Dec 2008 & 50% of $1.44 advance

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