Monday, February 22, 2010

Greece Remains in Highlight - Risk Appetite Boosted

Briefing
The dollar was mixed in the Asian morning Monday, as risk appetite improved, driving yen crosses and the euro higher. Euro-dollar rose to a $1.3655 high in Asia, boosted by an early gap higher in euro-yen. The cross broke through Y125.00 and triggered stop-loss buy orders, which helped carry it up to Y125.24 before fixing flows dragged it off the high. Euro-dollar pulled back towards $1.3600 but made another run higher as talk emerged of possible orders from Asian sovereign accounts, which lifted the pair to around $1.3640. Dollar-yen meanwhile was trading around Y91.60 as the morning ended, little changed from the NY close. The pair got an early boost from euro-yen's gains but topped out after running into offers above the morning's fix at Y91.78, from Y91.90/Y92.00.

Greece remains in the spotlight, some suggesting that positive comments over the weekend have improved the general risk tone, while tech traders see the recovery in euro-dollar as a healthy correction with downside still favoured.

It is a light data calendar for today, focus for the week on Fed Bernanke Wednesday. Data wise, focus for the week is on German IFO (Tuesday), German GDP and US new home sales (Wednesday), US durable goods orders, German employment and Japan industrial production (Thursday), euro area CPI and the second estimate for US Q4 GDP and existing home sales (Friday).

Euro
Euro-dollar opened Asia around $1.3615, just off Friday's late recovery high of $1.3619, with rate meeting early demand interest from a US investment bank in thin Wellington trade that pushed rate up to trip stops above $1.3630, allowing rate to extend this early rally to $1.3648. Rate eased back to $1.3635/30 before pushing higher again, this time led by Tokyo fix demand for euro-yen, which took rate to session highs of $1.3655 ($1.3657 61.8% $1.3789/1.3443).

Rate met US investment house sales around this area which again squeezed it back to $1.3630, with early supply in Europe breaking the rate below this broken resistance level as market hunted out weak Asian longs. Rate dipped to $1.3615, currently holding around $1.3620. Offers remain in place around $1.3655, a break above $1.3660 to open a move toward $1.3705/15 ($1.3707 76.4%/$1.3714 Feb 17 int.day high). Support back at $1.3605/00, a break to open a move toward $1.3580/70 ahead of $1.3550. Euro-dollar recovery off Friday $1.3443 lows aided by positive reports on Greek debt, though tech traders so far see this as a correction and keep downside favoured.

RES 4: $1.4026/46 High 3 Feb, Lows 21 Jan, 17 Aug
RES 3: $1.3838/53 High 9 Feb, Low 1 Feb
RES 2: $1.3789 High 17 Feb, 21-day moving average
RES 1: $1.3655 Minor highs

CURRENT LEVEL: $1.3638

SUP 1: $1.3420/50 76.4% of April/Dec rally, Bollinger base, Low 18 Feb
SUP 2: $1.3404 61.8% retracement of the post-Oct 2008
SUP 3: $1.3380 2% Moving average envelope
SUP 4: $1.3364 Projected channel support 3 Dec


Yen
Dollar-yen opens in Europe at Y91.61 euro-yen Y124.76 The dollar-yen was relatively quiet overnight, spending much of the session consolidating in a Y91.42-Y91.90 range. Initial good demand coming ahead of this weeks Toshin releases which start tomorrow. Traders noted Japanese retail accounts buying the dip helping dollar-yen test higher, however the rally was short lived and stalled at the Y91.90 level as more supply comes in ahead of the Y92.00 level. Traders had reported last week of good selling interest layered on the topside from Y92.10 upwards.

The Y92.23 level is the 200dma and capped the market on it's last test of this indicator, close behind that is down trendline resistance at Y92.37. The cross-yen tested higher early in the session with euro-yen trading on the Y125.00 handle for the first time since 4th February. This strength was sold into and the market pulled back to the Y124.70 area.

RES 4: Y93.02 50% of Nov/Jan projection
RES 3: Y92.53 76.4% retracement of Jan/Feb decline
RES 2: Y92.30 200-day moving average
RES 1: Y92.16 High 19 Feb

CURRENT LEVEL: Y91.68

SUP 1: Y91.60 Top of the Ichimoku cloud
SUP 2: Y91.30 5-day moving average
SUP 3: Y90.35/60 Tenkan & Kijun lines
SUP 4: Y90.20/30 21 & 100-day moving average


Cable
Opened Asia around the NY recovery high at $1.5476 ($1.5474 38.2% $1.5675/1.5350) and picked up an early bid tone as rate tracked euro-dollar's recovery extension, the rate pushing to an initial high at $1.5485. US investment house sales squeezed rate back to $1.5430 (Friday's recovery break out level), the rate buoyed as currency demand emerged at the Tokyo fix, with demand for yen crosses taking cable up to mark session highs at $1.5497.

Rate drifted off this fresh high, finding support around $1.5480 before early Europe provided the added weight to squeeze it back to $1.5450. Rate currently trades around $1.5460. Support seen between $1.5450/45, a break to allow for a retest on the key $1.5430 level. Below here and rate can squeeze on toward $1.5310/00. Resistance remains in place toward $1.5500, a break to expose $1.5510/15 ($1.5513 50% $1.5675/1.5350) ahead of $1.5550 (50%). Tech traders see this recovery as a healthy correction (extends 4th wave) and while rate holds below $1.5600 seen keeping underlying focus on the $1.5265/60 area.

RES 4: $1.6020 55-day moving average
RES 3: $1.5833/50 Low 30 Dec, Former bear-flag top, Low 1 Feb
RES 2: $1.5800 21-day moving average
RES 1: $1.5623 Former bear-flag base

CURRENT LEVEL: $1.5483

SUP 1: $1.5565 Minor support from 5-day moving average
SUP 2: $1.5350 50% retracement of $1.3659 to $1.7041, Low 19 Feb
SUP 3: $1.5310 Current base of the daily Bollinger band
SUP 4: $1.5275 61.8% of implied full bear-flag target


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