Highlights: UK Retail Sales and Euro PMI

Briefing
The dollar was mixed in Asia Thursday, as weaker yen crosses dragged dollar-yen lower, although the dollar held firm on the euro.

Dollar-yen was last at Y92.85, having eased from early highs of Y93.19 (NY close). Euro-dollar is currently at $1.3398 in early European trade, after extending a tight Asian range of $1.3373/97 to $1.3401. Euro-yen wilted on a combination of weak euro sentiment and worsening risk appetite, with some traders highlighting an Asahi News article suggesting Japan could be close to an end to QE. This news weighed on the Nikkei, with knock on effects seen across other equity markets and adding to the risk-off tone.

Official activity seen again in local Asian currencies, which could prompt further euro-dollar demand on intraday dips. Sterling remains favoured, supported by ongoing dividend demand from a UK oil company expected during the day, with a UK clearer expected to have similar interest Monday for its dividend. Key resistance at $1.5446 is seen coming under pressure into early Europe. Stops are noted on a break of $1.5450, which if triggered to open a move on toward $1.5470/80. Talk suggests Asian sovereign sell interest to be seen at this latter level

Eurozone flash PMI's and UK retail sales provide this morning's highlights.

Euro
Euro-dollar opened Asia around $1.3392 and initially edged up to mark session highs at $1.3397 before meeting strong headwind sell pressure from early euro-yen sales. The rate was pressed back to $1.3373 before meeting support, the rate then gradually correcting higher through a mainly subdued session toward the early highs. Early Europe added further demand interest, probed for stops above $1.3400, taking the rate to $1.3403 but momentum quickly faded as rise quickly attracted sellers, profit taking as well as positioning ahead of stops said to lie at $1.3405/10.

The euro currently trades around $1.3395. Picking up talk of further sell interest placed between $1.3415/25, with further stops noted on a break of $1.3430. Further offers are also seen towards $1.3450 with more stops noted on a break of $1.3455. Support remains toward $1.3370, with option linked demand expected to emerge if the $1.3350 level seen threatened. Asian cenbank activity overnight in local currencies expected to produce demand from this sector into any dips, Asian sovereign names the main noted names that cushioned Wednesday easing at $1.3358. Stops below $1.3350, more through $1.3330.

RES 4: $1.3915/25 100-day moving average, 50% of 2010 range
RES 3: $1.3819 High 17 Mar
RES 2: $1.3680/92 Current top of Bollinger band, High 12 Apr
RES 1: $1.3485 21-day moving average

CURRENT LEVEL: $1.3390

SUP 1: $1.3350 Former resistance line 3 Dec
SUP 2: $1.3270/80/90 Low 25 Mar, 8 Apr, Bollinger band
SUP 3: $1.3246/50 Low 6 May, 50% projection level
SUP 4: $1.3057 38.2% of $0.8232 to $1.6039

Yen
Cross yen came under early sell pressure into Asian trade Thursday, with traders linking the move to a press report that the BOJ is likely to raise its growth and inflation forecasts in its outlook report next week. Japanese exporters led the selling, with Japanese trust banks also noted in the mix, taking euro-yen down from early highs of Y124.78 to Y124.05, with dollar-yen dragged lower from Y93.19 to Y92.74. Demand interest placed ahead of Y124.00 provided a cushion and allowed rate to recover back to the Y124.30/40 area. Dollar-yen was also trading off overnight lows into early Europe, currently trading around Y92.90.

Dollar-yen demand said to stretch from Y92.50 to Y92.20 expected to provide decent support, while main offers remain in place on approach to Y93.50 (NY high Weds Y93.45), though one trader suggests sell interest covers an area from Y93.30 through to Y93.80. Euro recovery efforts remain muted by the ongoing eurozone debt concern, primarily focused on Greece, with Portugal and Spain in the background, with traders looking to fade rallies. Euro-yen offers seen toward Y124.80, more at Y125.20/50.

RES 4: Y95.05/09 High 24 Aug 2009, 61.8% retracement of 2009 decline
RES 3: Y95.00 Minor resistance line from Jan high
RES 2: Y94.72/78 76.4% retracement of Aug/Nov decline, High 2 April
RES 1: Y93.34/56 Minor res line from 2 Apr, High 21 Apr, 61.8% retrace

CURRENT LEVEL: Y92.87

SUP 1: Y91.60/67 Low 19 Apr, 61.8% of 18 Mar to 1 Apr rally
SUP 2: Y91.30 55, 200-day moving average
SUP 3: Y91.00 100-DMA
SUP 4: Y90.67/90 61.8% of 4 March rally, Top of the Ichimoku cloud

Cable
Cable opened Asia around $1.5415 and initially edged up to $1.5430, as early traders probed for stops above the NY recovery high at $1.5426. Rate slipped back to $1.5400 on cross yen sales, but strong underlying demand interest for sterling through straight cable (ongoing dividend linked demand by a UK oil company expected to be seen again Thursday, interest said to roll on to Tuesday, with traders also noting similar interest from UK clearer for Monday, as well as M&A Deutsche Bahn buying of UK Arriva approx stg1.5bln), as well as pressure on euro-sterling with the UK currency expected to be a major beneficiary of euro woes, as well as the mentioned M&A flow.

HSBC and GS have put out sell recs for the cross and seen adding weight. Cable recovered through the Asian session, pushing above Monday's high at $1.5435 and on to pressure the key $1.5445/50 area. Area held on first challenge, giving way on the second with triggered stops through $1.5455 taking it on to $1.5476. Asian sovereign sell interest has been suggested in place between $1.5470/80 though no reports received so far to confirm.

RES 4: $1.5620 50% of 2010 decline
RES 3: $1.5580/93 High 23 Feb, Bollinger band, 38.2% of Nov/Mar move
RES 2: $1.5522 High 15 Apr
RES 1: $1.5511 Former channel support

CURRENT LEVEL: $1.5431

SUP 1: $1.5365 5-day moving average
SUP 2: $1.5260 21-day moving average
SUP 3: $1.5163 50% retracement
SUP 4: $1.5130 Low 6 Apr