Wednesday, March 10, 2010

Cable Remains Under Selling Pressure

Briefing
The dollar was little changed against the majors Wednesday, although trended higher against the pound. Dollar-yen was last at Y90.01, compared with Y89.96 late in the U.S. session, with trade in Asia contained within a tight range of Y89.85/90.11. Euro-dollar was last at $1.3597, versus $1.3610 close in NY. The pair traded between $1.3588 and $1.3614 in Asia. The pair gave up the $1.3600 mark in quiet morning trade in Asia today as sell orders from $1.3620/25 weighed down on the euro-zone currency and with sterling weakness also adding to the pressure.

Cable was last at $1.4965, at the low end of its $1.4955 to $1.5017 Asian range. Sterling remains pressured on concerns over the UK fiscal position, the looming election and renewed fears over the banking system. German CPI at 0700GMT, France IP at 0745 and UK IP at 0930 the morning's highlights, with a light US data calendar. Trading in Asia was described as generally subdued, the only real moves coming in cable as it failed to build after its overnight recovery above $1.5000.

Euro
Euro-dollar opened the Asian session around $1.3610, having recovered from NY lows of $1.3537, with rate edging up to $1.3614 in early trade as rate took direction from early cable gains, helped in part by minor demand for euro-yen. Rate drifted off highs, as cable dropped back, but found support around $1.3588 on Swiss name buys of euro-sterling.

Fresh sales into early Europe has taken the rate through the overnight lows to $1.3577 (50% $1.3537/1.3617), currently trading around $1.3580. Early talk suggests stops placed between $1.3570/65, though Asian traders note sovereign demand interest placed around the $1.3560 level close behind. Resistance seen at $1.3615/20.

RES 4: $1.3838/53 High 9 Feb, 23.6% of Dec/Mar decline, Low 1 Feb
RES 3: $1.3802 Top of Dec/Mar channel
RES 2: $1.3789 High 17 Feb
RES 1: $1.3736 High 3 March, Current Bollinger band

CURRENT LEVEL: $1.3600

SUP 1: $1.3530 Low 5 March
SUP 2: $1.3475 Current Bollinger band base
SUP 3: $1.3420/37 76.4% of April/Dec rally, Low 2 Mar
SUP 4: $1.3404 61.8% retracement of the post-Oct 2008


Yen
Dollar-yen open Y89.92 and euro-yen open Y122.34 in Europe. Dollar-yen had a quiet session overnight as trading in Asia was restricted to a Y89.85 - Y90.11 range with the majority of that time spent around the Y90.00 level. Traders report decent size expiries maturing today with strikes at Y90.00. Technically traders expect decent support in the Y89.40 region.

Late in the session traders noted Sovereign interest to buy lifting the pair to the highs of the session. The cross-yen was very similar to the dollar-yen with a very quiet session overnight. After an initial sell off the crosses rallied, helped by decent demand for the Aussie and Kiwi. However traders report decent size expiries in Aussie-dollar all the way up to $0.9200 providing some supply on the topside and these offers halted the rally.

RES 4: Y91.90 200-day moving average
RES 3: Y91.24 76.4% retracement
RES 2: Y91.00 Top of the Ichimoku cloud
RES 1: Y90.65/70 61.8% retracement, 55-day moving average

CURRENT LEVEL: Y90.07

SUP 1: Y89.65/70 Low 9 March, First near-term Fibonacci level
SUP 2: Y89.40 Tenkan line of the Ichimoku cloud
SUP 3: Y89.25 Base of the Ichimoku cloud
SUP 4: Y88.13/24 Low 4 March, 61.8% retracement of Oct/Dec rally


Cable
Opened in Asia around $1.4995 and was initially squeezed to a session high of $1.5017 on reported UK bank buys, traders suggesting that stops placed above $1.5030 were the target. However, move up ran into good supply around $1.5015 from a US investment house and a Nordic name which initially faced off the UK bank demand before pressuring the rate lower, the UK name turning his long position on the break back below the figure.

Continued sales of sterling, via sterling-yen, and Swiss name buys of euro-sterling, took rate down to session lows of $1.4955. Rate came under further pressure into early Europe, a major UK clearer the noted seller as rate broke below Tuesday's lows at $1.4936, extending its recent corrective pullback to $1.4913. Rate currently trades around $1.4925, buoyed off lows as euro-sterling again meets decent resistance ahead of stg0.9100. Support seen from that mentioned low through to $1.4900, a break to expose stronger support at $1.4880 (76.4% $1.4781/1.5197) ahead of $1.4855/50. Resistance now seen at $1.4950/55.

RES 4: $1.5420/22 61.8% of Feb/Mar decline, 38.2% of 2010 decline
RES 3: $1.5340/50 21-day moving average, Breakout level
RES 2: $1.5299 50% retracement of post-17 Feb decline
RES 1: $1.5197 High 8 March

CURRENT LEVEL: $1.4974

SUP 1: $1.4820/55 Low 2 March
SUP 2: $1.4781 Current base of the daily Bollinger band, Low 1 March
SUP 3: $1.4659 High 23 Feb
SUP 4: $1.4619 Low 29 Apr

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