Wednesday, February 3, 2010

Focus Today on Greek Deficit Cutting Plan

Briefing
The dollar was little changed in Asia Wednesday. Just ahead of the European open, dollar-yen was at Y90.45, in the middle of it's Y90.31/57 Asian range and little changed from where it ended in New York, around Y90.39. Euro-dollar stood at $1.3963, in the middle of the $1.3946/76 range. Flows were muted and tied to narrow ranges. Sterling enjoyed standout activity, boosted by the release of upbeat Nationwide consumer confidence data which took cable above $1.6000, with continued buying able to brush aside reported real money offers toward $1.6010, trading around $1.6030 in early Europe.

Focus today will be on the European Commission's response to the Greek deficit cutting plan, though most expect any criticism to be tempered. Eurozone and UK services PMIs provide additional focus, while the Norges Bank rate announcement at 1300GMT should see a pause in the recent tightening cycle. US ADP hiring and ISM non-manufacturing data in focus for this afternoon.

Euro
Euro-dollar opened Asia around $1.3970 and initially pushed up to mark session highs at $1.3978 before meeting decent supply placed on approach to $1.3980. US name selling provided the main counter with stronger sales prompted as the market reacted to a report that Fitch had downgraded two Chinese banks. The news weighed on Asian equity markets, prompting strong selling in euro-yen and Aussie-yen, which helped to squeeze euro-dollar to lows of $1.3947.

Recovery in Asian stocks allowed euro-dollar to recover, trading around $1.3970 into early Europe. Rate remains contained, traders noting strong demand Tuesday by a semi official name which kept rate buoyed above $1.3920/10, while decent supply kept rate capped below $1.3980. Offers remain in place between $1.3980/90, with plenty of talk mentioning stops above $1.4000, some suggesting main interest seen from $1.3905 through to $1.4025. European Commission is due to deliver a response to the Greek deficit cut plans, though most expect any criticism to be tempered. Greek/bund spreads and equity market influence on risk to continue to provide main drive.

RES 4: $1.4218 Low 22 Dec, 21-day moving average
RES 3: $1.4195 High 25 Jan
RES 2: $1.4132 First main Fibonacci level, while $1.3853 remains base
RES 1: $1.4032 Low 21 Jan

CURRENT LEVEL: $1.3963

SUP 1: $1.3853 Low 1 Feb
SUP 2: $1.3825 Low 22 June
SUP 3: $1.3801 50% retracement of March/Dec rally
SUP 4: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June


Yen
Quiet session overnight in the dollar-yen with the pair staying in a very tight range of Y90.30-Y90.56. Talk of some real money accounts and Japanese lifers on the bid but overall very lacklustre. The cross yen was bit of a different story in particular the Aussie-yen and euro-yen as the risk on/off theme continued. News that Fitch downgraded 2 Chinese banks appeared to have a negative influence on the Asian equity markets and this led to a sell off in the cross-yen.

However as the equity markets recovered so did the crosses and the euro-yen Y126.35 and Aussie-yen Y80.33 both returned levels just off the highs of the session. For today support can be seen in Aussie-yen at Y79.80, Y79.50 and Y79.26 resistance is noted Y80.40, Y81.00. In euro-yen support at Y126.00, Y125.80, resistance Y126.48, Y126.70. Key levels in dollar-yen support, Y90.20, Y90.00 resistance at Y90.60 and Y90.95.

RES 4: Y92.65/70 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: Y90.93/00 Recent highs 29 Jan/2 Feb, 21-day moving average

CURRENT LEVEL: Y90.51

SUP 1: Y89.14/45 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
Cable opened Asia around $1.5970 and pushed up to challenge reported offers placed toward $1.6000 (NY high $1.5998). Rate made a show above the figure to $1.6009 before meeting real money supply which capped this initial move. Rate reversed the early rally as risk took a knock as Asian equities fell on reports that Fitch had downgraded two Chinese banks. Rate found support at $1.5966 ($1.5963 is 50% of $1.5917/1.6009) before bouncing back. This move again met resistance ahead of $1.6000 before a second push took rate through the reported offers at $1.6010 and on to challenge tech resistance at $1.6013 (38.2% $1.6277/1.5850).

Eventual break here took rate on to session highs of $1.6033 ahead of the European open, with Europe taking it on to $1.6038 before momentum faded. Rate eased to $1.6025/20 before finding renewed demand interest that has lifted the rate on to fresh highs at $1.6045. Offers seen placed toward $1.6050 with further interest seen dotted toward $1.6065 ($1.6064 50%). Above here and rate can push on toward $1.6080 ahead of $1.6114 (61.8%). Support seen at $1.6025/20, $1.6000.

RES 4: $1.6235/70 200, 55 & 100-day moving average
RES 3: $1.6155 21-day moving average
RES 2: $1.6080 Low 22 Jan
RES 1: $1.6015 5-day moving average

CURRENT LEVEL: $1.6004

SUP 1: $1.5833/50 Low 30 Dec, Low 1 Feb
SUP 2: $1.5770 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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