Tuesday, February 16, 2010

Dollar Losing Ground Amid Thin Liquidity

Briefing
Euro-dollar was trading higher in Asian trade Tuesday, rallying from early lows of $1.3588, and boosted through the afternoon session to highs of $1.3655. However, traders say flows remain choppy in light holiday trade, as much of Asia remains out for the New Year celebrations. With Greek issues seemingly kicked into the long grass for a month by eurozone finance ministers, euro-dollar sellers have throttled back a little.

Dollar-yen is again tied to a modest range, stuck between Y89.72 to Y90.07 as the market traded sideways ahead of the return of US markets. The pair was last at Y89.80.

The release of RBA Minutes provided the main catalyst for risk on flows, the Bank concluding that if economic conditions improve then more hikes will be necessary, though with one eye kept on the global situation. Aussie triggered stops through $0.8910/20 with rate holding toward its session highs of $0.8945 into early Europe.

UK inflation data is due at 0930GMT, followed by Germany ZEW at 1000GMT providing the morning's highlights, along with any Greece developments. Already this morning, EU's Juncker has said the issue of aid to Greece was discussed but added that Greece must understand other EU nations are not prepared to pay for their mistakes.

Euro
Euro-dollar opened Asia around $1.3600 and held steady around this level before edging to $1.3630 (from an early low of $1.3588) into the Tokyo fix. Rally extended during the Asian afternoon to $1.3655, the move up aided by a generally soft dollar, last night's Eurogroup meeting basically putting back any firm decision on Greece 30 days and prompting some short covering along with Japanese demand for euro-yen.

Trading conditions remain thin as many Asian centres remain closed to celebrate the Chinese lunar new year. Rate retains a firm tone into early Europe, extending the topside to $1.3663, currently trading around $1.3650. Offers seen placed around $1.3686 (50% $1.3840/1.3532/recent high) a break to allow for a move on toward $1.3700 ahead of $1.3720/25. Support $1.3590/80, with Asian traders reporting strong interest placed at $1.3585. A break here to allow for a deeper move toward $1.3565/60 ahead of $1.3535/30.

RES 4: $1.4026/46 High 3 Feb, Lows 21 Jan, 17 Aug
RES 3: $1.3895 21-day moving average,
RES 2: $1.3838/53 High 9 Feb, Low 1 Feb
RES 1: $1.3687 Resistance line from 14 Jan

CURRENT LEVEL: $1.3649

SUP 1: $1.3532 Low 12 Feb
SUP 2: $1.3495 Current Bollinger band base, 61.8% of March/Dec rally
SUP 3: $1.3430/41 2% MAE, Proj channel support 3 Dec
SUP 4: $1.3404/20 61.8% of the post-Oct 2008 76.4% April/Dec rally


Yen
Dollar-yen open in Europe at Y89.82. Another very quiet session overnight as most of Asia is still off for the Lunar New Year. The dollar-yen traded a Y89.92-Y90.04 range in Asia as very little news or orders passed through the market. On a technical note the dollar-yen is still in the daily Ichimoku cloud, and the base of the cloud is still at Y89.29 the top of the cloud today is again at Y91.53 and doesn't appear to be in play at the moment.

The daily down trendline that capped yesterday and at the end of last week is at Y90.11 level today, traders report a break of this line could see the market make an attempt at the Y90.50 level which is said to hold some offers with traders going on to say some stops placed behind.

RES 4: Y91.87 High 21 Jan
RES 3: Y91.55 Top of the Ichimoku cloud
RES 2: Y91.28 High 3 Feb
RES 1: Y90.43/61 High 11 Feb, Kijun line

CURRENT LEVEL: Y89.75

SUP 1: Y89.90 Base of the Ichimoku cloud
SUP 2: Y88.55 Low 4 Feb
SUP 3: Y88.24 61.8% retracement of the 26 Nov rally
SUP 4: Y87.36 Low 9 Dec


Cable
Opened Asia around $1.5660, marking session lows at $1.5655 before pushing higher as rate took advantage of a generally weaker dollar. Rate edged to an initial high of $1.5690, squeezing on to $1.5710 during afternoon trade. Mid east buying of cable, and euro-dollar, into early Europe provided the upside impetus to take rate on to $1.5726.

Rate eased back to $1.5716 but seen nudging back toward the recent high. Offers seen placed between $1.5740/50. Support $1.5655/50. UK inflation data due at 0930GMT this morning's highlight.

RES 4: $1.5930 21-day moving average
RES 3: $1.5888 38.2% retracement of Jan/Feb decline
RES 2: $1.5833/50 Low 30 Dec, Low 1 Feb
RES 1: $1.5766 High 10 Feb

CURRENT LEVEL: $1.5708

SUP 1: $1.5535/88 Low 8 Feb Minor support line from 8 Feb low
SUP 2: $1.5425 Current base of the daily Bollinger band
SUP 3: $1.5409/12 61.8% retracement of $1.44 advance, Projection level
SUP 4: $1.5350/68 50% retracement of $1.3659 to $1.7041, High 5 Jan 2009

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