Monday, February 15, 2010

Focus on EuroGroup Meeting on Greece Today

Briefing
The major FX pairs traded in tight ranges in Asia Monday, as regional and US holidays kept many players sidelined. Volumes were subdued. However, the euro remains pressured ahead of European finance minister meetings (Eurogroup meeting later today seen as the more important of the two, Ecofin Tuesday), as the market awaits further developments over Greece. Euro-dollar was last trading close to session lows at $1.3578, having slipped off earlier highs at $1.3635. Dollar-yen was also becalmed in a narrow range, with the pair trading a tight Y89.98 to Y90.23 range.

Goldman Sach's Jim O'Neill reported suggestions that China may revalue Yuan by up to 5% only caused slight reaction in the yen crosses, euro-yen holding overnight within a range of Y122.41/90, and favouring the bottom side into early Europe. Very light data calendar for today, with focus this week, apart from Greek developments, turning to January's FOMC Minutes (Wednesday), which should provide clarity on Kansas City Fed President Hoenig's dissention, and whether other members were openly sympathetic to his views.

Euro
Euro-dollar opened the holiday thinned Asian session around $1.3622 and initially edged up to mark session highs at $1.3635 before turning lower on euro-yen sales as this rate reacted to the release of better than expected Japanese GDP data, along with reported comments from Goldman Sach's Jim O'Neill suggesting that China is poised to let the yuan rise by as much as 5%. Rate filled demand interest placed around $1.3600 before extending the base to $1.3578 in late Asian dealing. Rate currently trades around $1.3587.

Focus today will be on the Eurogroup meeting and any information forthcoming on the current Greece situation. Bids seen placed from the overnight low at $1.3578 through to $1.3574 (61.8% $1.3532/1.3643) ahead of $1.3558 (76.4%) and Friday's lows at $1.3532. Behind here and demand said to remain between $1.3520/10 with residual barrier interest seen at $1.3500 (after part rolled off Friday). Resistance $1.3600/05, more toward $1.3620. A break here to open a move toward $1.3630/35 ahead of Friday's recovery high at $1.3643.

RES 4: $1.4026/46 High 3 Feb, Lows 21 Jan, 17 Aug
RES 3: $1.3930 21-day moving average,
RES 2: $1.3838/53 High 9 Feb, Low 1 Feb
RES 1: $1.3723 Resistance line from 14 Jan

CURRENT LEVEL: $1.3596

SUP 1: $1.3532 Low 12 Feb
SUP 2: $1.3495 Current Bollinger band base, 61.8% of March/Dec rally
SUP 3: $1.3461 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 Y90.15. A very quiet session overnight as most of Asia is off for the Lunar New Year. The dollar-yen traded at Y90.04-Y90.23 range as very little news or orders passed through the market and with the U.S and Canada off today it looks set to be a quiet day ahead.

On a technical note the dollar-yen is still in the daily Ichimoku cloud, and the base of the cloud is now at Y89.29 the top of the cloud today is at Y91.53 and doesn't appear to be in play at the moment. The daily down trendline that capped last week is at Y90.24 level today, a break of this line could see the market make an attempt at the Y90.50 level which is said to hold some offers.

RES 4: Y91.87 High 21 Jan
RES 3: Y91.55 Top of the Ichimoku cloud
RES 2: Y91.15/28 Kijun line, High 3 Feb
RES 1: Y90.43 High 11 Feb

CURRENT LEVEL: Y90.13

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 $1.5680 and came under early pressure which took rate to early lows of $1.5646 as market reacted to reports of Dubai World's proposals for restructuring its debt. Denial of this report helped rate to recover to retest earlier highs before settling between $1.5655/75 during the mid part of the overnight session before slipping back to mark session lows at $1.5639.

Rate retained a heavy feel as it entered European trashing, with early market again reacting to the Dubai World reports to take rate to fresh lows of $1.5611. Rate has since recovered, currently trading around $1.5640. Support said to remain in place from $1.5611 through to $1.5600, a break below to expose Friday's lows at $1.5580. Resistance $1.5685/95, more toward $1.5705/10 ahead of stronger interest at $1.5740/50. Light data calendar today, with interest this week focused on UK inflation data Tuesday and BOE Minutes Wednesday.

RES 4: $1.5960/97 21-day moving average, 50% retracement of Jan/Feb decl
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: $1.5647

SUP 1: $1.5535 Low 8 Feb
SUP 2: $1.5420 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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