Friday, February 5, 2010

Focus on US Labor Data Today

Briefing
The dollar chalked up modest gains in the Asian morning Friday as risk sentiment continued to worsen. Dollar-yen got a lift from lows of Y88.90 early doors to trade at Y89.75 initially. The pair extended those gains even as yen crosses retreated, touching Y89.79. The euro was battered again this morning, courtesy of the weakening risk environment, touching a low at $1.3761, before rallying to $1.3710. There was good action in Swiss crosses overnight, with some market chatter - unconfirmed - of SNB activity. Euro-Swiss dipped early to Chf1.4551, attracting some spec names.

The cross edged up to Chf1.4620 initially, and then jumped to Chf1.4905, sparking talk of intervention (some traders say the SNB was seen paying at the high, with the rate through the legs trading a lot lower, before eventually it eased back to settle around Chf1.4700/20). Dollar-Swiss was also higher, touching Chf1.0800 highs before profit-taking from specs emerged. US employment report at 1330GMT the day's highlight. Expect position adjustments ahead of release.

Euro
Euro-dollar opened in Asia around the NY closing lows at $1.3727. Early, pre-fix demand for euro-yen provided an initial recovery lift which took rate up to session highs of $1.3747, but demand faltered in post fix trade leaving the rate to drop back through overnight lows, the momentum able to trigger stops/barrier through $1.3700 before taking it to fresh lows of $1.3669. Rate snapped back to $1.3725 as euro-Swiss saw a savage reversal off its pressured lows of Chf1.4551, with official intervention suggested to have taken rate to a high of Chf1.4905.

Euro-Swiss eased back to settle between Chf1.4700/20, while euro-dollar corrected back to $1.3700 before lifting back toward those recovery highs into early Europe. Rate currently trades around $1.3725. Offers seen placed to $1.3730 ($1.3729 76.4% $1.3747/1.3669), a break above to allow for a move toward $1.3745/50. Support remains at $1.3700 ahead of $1.3669.

RES 4: $1.4195 High 25 Jan
RES 3: $1.4160 21-day moving average
RES 2: $1.4026/46 High 3 Feb, Lows 21 Jan, 17 Aug
RES 1: $1.3853 Low 1 Feb, 5-day moving average

CURRENT LEVEL: $1.3895

SUP 1: $1.3655 2% Moving average envelope
SUP 2: $1.3635 Current base of the daily Bollinger band
SUP 3: $1.3485 61.8% retracement of March/Dec rally
SUP 4: $1.3404/20 61.8% of the post-Oct 2008 76.4% April/Dec rally


Yen
Dollar-yen was hit hard late in Thursday's session as the cross-yen sell- off impacted. Overnight, a range of different accounts were seen buying cross yen, and this helped the dollar-yen recover over 100 points off the low of Y88.55. We are now firmly in the Ichimoku cloud that was initially providing decent support, a daily close below Y88.90 would be seen as very negative for the pair but the market awaits US non-farm payrolls for the next indication on direction.

The cross-yen collapsed late in Thursday trade, the risk-off scenario continuing as equities and commodities markets were sold aggressively. Overnight there was a light recovery, some bargain hunting occurred as a range of different accounts bought the crosses.

RES 4: Y91.87 High 21 Jan
RES 3: Y91.28 High 3 Feb
RES 2: Y90.70 21-day moving average
RES 1: Y90.00/35 Tenkan line, 100 & 55-day DMAs, Top of the Ichimoku cloud

CURRENT LEVEL: Y89.62

SUP 1: Y88.95 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 $1.5760, off its NY lows of $1.5716, and extended its recovery in early trade to $1.5776 as cross yen saw good demand interest into the Tokyo fix. This demand faded post fix and allowed rate to drop back to $1.5714 ahead of the European open, with added selling into Europe providing the weight to extend move to $1.5704.

Rate currently trades around $1.5735/40. Resistance seen toward $1.5750 ($1.5748 61.8% $1.5776/04) ahead of $1.5760 (76.4%) and $1.5775/80. Support remains in place between $1.5705/1.5690 with stops below, which if triggered to open a deeper move toward $1.5660/50.

RES 4: $1.6125 21-day moving average
RES 3: $1.6080 Low 22 Jan
RES 2: $1.5880 5-day moving average
RES 1: $1.5833/50 Low 30 Dec, Low 1 Feb

CURRENT LEVEL: $1.5721

SUP 1: $1.5708/21 Low 13 Oct, High Dec 2008 & 50% of $1.44 advance
SUP 2: $1.5680/88 2% moving average envelope, 38.2% of 2009 range
SUP 3: $1.5545 100% projection of $1.7041/1.5708 decline
SUP 4: $1.5409/12 61.8% retracement of $1.44 advance, Projection level

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