Wednesday, April 28, 2010

Focus Remains on Greece/Eurozone Developments - FOMC moving into focus for tonight

Briefing
The dollar eased back from early highs against the euro as the single currency managed a weak bounce off lows. Euro-dollar led the way higher with a mild rebound back through $1.3200, having touched a session low at $1.3144, although the gains were limited to $1.3218. The recovery seen as regional bourses moderated losses with comments from EU Von Rompuy suggesting negotiations with Greece were well on track and was convening a meeting on May 10.

Dollar-yen was trading at Y93.20, close to the middle of a fairly narrow Y93.00 to Y93.37 range and was seen shrugging off strong retail sales data, though base effects were said to have diluted the positivity.

Cable extended its corrective pullback to $1.5225 (NY low $1.5240) with recovery efforts in Asia holding well below $1.5300. Sterling was also seen a victim of the move away from risk.

The Aussie was boosted by release of strong CPI data, increasing speculation for another rate hike next month. Meanwhile, the Kiwi was firm, aided by a strong business confidence number.

Greece/eurozone developments remain in focus, with FOMC tonight moving into view.

Euro
Euro-dollar opened Asia around the NY session lows of $1.3166, the rate reeling in Tuesday's session on the back of S&P downgrades to Portugal and Greece. Rate came under fresh sell pressure into early Asian dealing, extending the pullback base to $1.3144, triggering an option barrier at $1.3150 in the process, as risk aversion carried over into this session. As equity markets moderated losses so the euro began to recover, the move up aided by today's meeting of the German parliament with the IMF with ECB Trichet in attendance (news was around Tuesday but excited Asia as viewed as an emergency meeting).

Rate initially edged into a $1.3165/85 range as market watched the GS proceedings. An FT article suggesting increased aid to Greece provided further upside pressure, along with reported comments from EU president Von Rompuy that he is convening a meeting on May 10. Euro-dollar pushed to $1.3218 before reported offers toward $1.3220 countered. Rate dropped to $1.3185/80 ahead of Europe, snapping back to $1.3215 as market reacted to Greek regulator banning short selling of Greek shares until June 28.

RES 4: $1.3725 Current top of Bollinger band
RES 3: $1.3692 High 12 Apr
RES 2: $1.3420/50 High 22 Apr, 21-day moving average
RES 1: $1.3275 5-day moving average

CURRENT LEVEL: $1.3206

SUP 1: $1.3147/55 Hourly lows, Base of the daily Bollinger band
SUP 2: $1.3128 50% projection level
SUP 3: $1.3096 Support line from 18 Feb
SUP 4: $1.3057 38.2% retracement of $0.8232 to $1.6039


Yen
Opened in early Europe around Y93.11 and Y122.90 Dollar-yen was heavy Tuesday as cross-yen sales weighed on the pair despite some very large buy orders going through. The pair traded down to Y92.81 in New York trade but has spent the Asian session consolidating ahead of the Y93.00 level with a range top at Y93.37. Traders note dollar-yen appears to be taking a breather before another leg lower.

Euro-yen had been under pressure in early Asian trade taking out the New York low and trading down to Y122.37. The dip was bought into as intra-day spec accounts looked to benefit from the recent volatility, the cross bounced and traded up to Y123.33 before more exiting longs came in and took the opportunity to exit. Traders note that the crosses are still very sensitive to any negative news out of the Eurozone and expect any rally to be used as an opportunity for stale longs to bail.

RES 4: Y95.05/09 High 24 Aug, Res line 7 Jan, high, 61.8% of 2009 decl
RES 3: Y94.72/78 76.4% retracement of Aug/Nov decline, High 2 April
RES 2: Y94.37 High 26 April
RES 1: Y93.40/60 21, 5-day moving average

CURRENT LEVEL: Y93.13

SUP 1: Y92.98 Tenkan line of the Ichimoku cloud
SUP 2: Y92.65 Near-term 61.8% retracement
SUP 3: Y92.37 Minor support line 4 Mar
SUP 4: Y91.60/67 Low 19 Apr, 61.8% of 18 Mar to 2 Apr rally


Cable
Cable finally gave way to the recent weak daily signals and slipped below the 21-day moving average, which turns initial resistance and risks a bear-cross with the 5-DMA at $1.5335/50. The close below here turns bear's focus towards Fibonacci retracements at $1.5163, $1.5078.

Euro-sterling daily studies remain weak after turning lower from within neutral territory. This still leaves bears pushing for a re-test of the stg0.8604 lows to maintain the falling channel in place from the start of March.

RES 4: $1.5620/30 50% of 2010 decline, 100-day moving average
RES 3: $1.5580/93 High 23 Feb, 38.2% of Nov/Mar move
RES 2: $1.5510/22 Bollinger band, High 15 Apr
RES 1: $1.5335/50 21, 5-day moving average

CURRENT LEVEL: $1.5272

SUP 1: $1.5227 Hourly low
SUP 2: $1.5163 50% retracement, Bollinger band
SUP 3: $1.5130 Low 6 Apr
SUP 4: $1.5078 61.8% retracement of April recovery 


Forex Analysis and Trading: Effective Top-Down Strategies Combining Fundamental, Position, and Technical Analyses (Bloomberg Professional)Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets (Wiley Trading)Essentials of Foreign Exchange Trading (Essentials Series)The Insider's Guide to Forex TradingMarket Indicators: The Best-Kept Secret to More Effective Trading and Investing (Bloomberg Professional) 

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