Friday, February 26, 2010

Dollar Mixed Overnight - Awaiting Marketmoving Data Today

Briefing
The dollar was mixed in Asia Friday, trading flat against the yen but lower against the euro. Euro-dollar extended gains that, started in late New York, with the rate breaking above $1.3550, triggering stops to take it to a session high at $1.3603. However, there was no follow-through above the figure, as the pair slipped back to $1.3585. Dollar-yen touched an early high at Y89.50, but slipped back to trade around Y89.30, close to the middle of the session range. Traders noted the Japanese unit had been under some downside pressure this morning after the release of CPI data.

Asian traders highlight an article in China's 21st Century Business Herald saying two ministries are carrying out stress tests in the exporting sector to see how they will handle a yuan appreciation. Cable lagged euro-dollar's recovery, allowing euro-sterling to make a show above stg0.8900. UK Nationwide house data due at 0700GMT, ahead of UK GDP at 0930GMT and EMU CPI at 1000GMT the morning's highlights, followed by US GDP at 1330GMT and Chicago PMI at 1445GMT.

Euro
Euro-dollar opened the Asian session around $1.3545, off NY recovery highs at $1.3572, and initially eased to mark session lows at $1.3531. Rate recovered on the back of strong cross yen demand at the Tokyo fix, the rate lifting through the NY high, triggering stops on the break of $1.3580 and moving on to a high of $1.3604.

Rate drifted lower in late Asia, squeezing back to $1.3560 into early European dealing. Offers seen placed between $1.3600/10, a break to open a move toward $1.3625/30. Support $1.3535/30 (Asia low $1.3531 and now 50% $1.3458/1.3604), a break to allow for a deeper move toward $1.3515/10 ahead of $1.3495/90. Rate currently trades around $1.3570.

RES 4: $1.3958 Top of declining channel, Bollinger band
RES 3: $1.3838/53 High 9 Feb, Low 1 Feb
RES 2: $1.3789 High 17 Feb
RES 1: $1.3693 High 23 Feb, 21-day moving average

CURRENT LEVEL: $1.3589

SUP 1: $1.3420/50 76.4% of April/Dec rally, Low 18 Feb
SUP 2: $1.3404 61.8% retracement of the post-Oct 2008, Bollinger base
SUP 3: $1.3310 2% Moving average envelope
SUP 4: $1.3286 Projected channel support 3 Dec


Yen
Dollar-yen opens in Europe at Y89.27 euro-yen Y121.13 The dollar-yen could not make too much impact sub Y89.00 and the reported bids down to Y88.80 held the market, the low was Y88.80 and since then the dollar-yen has rallied back to trade up to Y89.51 where traders reported Japanese exporters selling . The pair are still trading around the base of the cloud and a close outside of the cloud would add to the negative sentiment for the pair.

The cross-yen market has recovered somewhat overnight as many market participants used yesterdays dip to take profit on shorts. The euro-yen took out the reported barrier at Y120.00 and traded down to Y119.66 but has since recovered to Y121.41 as month end demand and Toushin flows helped the cross recover. Traders note to watch equity market moves today for clues of direction as the risk on/off correlation continues.

RES 4: Y92.16 High 19 Feb, 200-day moving average
RES 3: Y91.35 Top of the Ichimoku cloud
RES 2: Y90.55 Tenkan line & 55-day moving average
RES 1: Y90.25/35 21 & 100-DMAs, Kijun line

CURRENT LEVEL: Y89.35

SUP 1: Y88.80 Low 25 Feb
SUP 2: Y88.55 Low 4 Feb
SUP 3: Y88.24 61.8% retracement of Oct/Dec rally
SUP 4: Y87.52 100% projection of the Jan pullback, from 19 Feb


Cable
Cable opened Asia around $1.5265, off NY lows at $1.5187. Rate initially eased back to mark session lows at $1.5234 before strong cross yen demand provided a lift, allowing the rate to push up to initial recovery highs at $1.5289. However, the upside correction lagged euro-dollar with euro-sterling extending its recovery to make a show above stg0.8900.

Cable dipped back to $1.5265 before picking up fresh demand interest which took it on to an overnight high at $1.5295. Rate currently trades back around $1.5265 as market awaits Nationwide house price data at 0700GMT. Support seen placed from around $1.5255/50, more between $1.5235/25. Resistance $1.5295/00.

RES 4: $1.5733 Broad Jan-Feb channel top
RES 3: $1.5640/57 Former bear-flag base, 21-day moving average
RES 2: $1.5576 High 23 Feb
RES 1: $1.5350/80 Breakout level, 5-day moving average

CURRENT LEVEL: $1.5284

SUP 1: $1.5200 Base of the daily Bollinger band
SUP 2: $1.5187 Low 25 Feb
SUP 3: $1.5164 Broad Jan-Feb channel base
SUP 4: $1.5072 Full bear-flag implied target

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