Tuesday, April 27, 2010

Markets Are Still Focusing on Developments in Greece

Briefing
Monday's late recovery tone in euro-dollar extended in early Asian dealing with the early market taking the rate from opening levels of $1.3385 to a high of $1.3417 as reported stops above $1.3420 attracted buyers.

Asian equity markets were pressured lower, led by the Shanghai Index which was trading off 2.4% by lunchtime as market reacted to talk of possible capital requirements on property developers, which in turn weighed back on euro-dollar. Strong sales of euro-dollar and euro-yen saw market move into a risk-off tone, taking euro-dollar back to $1.3364, while euro-yen squeezed down to Y125.34 from early highs of Y125.97.

Aussie-yen was sold lower by Japanese names despite release of better than forecast Australian PPI data, and a report in the Asahi press that Japanese Post will look to invest part of an investment portfolio of Y10tln overseas (though no time frame given). NZ Fonterra increased milk payments but slip in risk countered any positive Kiwi react.

Greece developments remain in focus. The BOK was also noted intervening to buy dollar-won earlier with expectation of euro-dollar demand later.

Euro
Opened Asia around $1.3385 with early demand continuing late NY's short squeeze, which had seen rate recover off a late Europe dip of $1.3299. Rate moved above $1.3400, meeting US investment and Nordic bank supply around $1.3405, but buy interest overwhelmed with reported stops above $1.3420 targeted. Sell interest ahead of this level capped move at $1.3417. The corrective pullback picked up momentum on risk aversion, prompted by losses in Asian equity markets, with a major French name a noted seller from around $1.3390.

Added sales in euro-yen squeezed rate to a low of $1.3364. Hedge fund demand ahead of $1.3360 provided a decent cushion, allowed rate to recover to $1.3385 ahead of the European open, easing back to challenge the overnight lows in early European dealing, extending the base to $1.3358 (50% $1.3399/1.3417). Rate currently trades around $1.3364. A break below $1.3358 to open a deeper move toward $1.3345/40 ahead of $1.3327 (76.4%). Resistance remains toward $1.3420, with stops reported above. Further stops above $1.3430. Offers then seen at $1.3450, with more stops on break.

RES 4: $1.3819 High 17 Mar
RES 3: $1.3705 Current top of Bollinger band
RES 2: $1.3692 High 12 Apr
RES 1: $1.3470 21-day moving average

CURRENT LEVEL: $1.3385

SUP 1: $1.3420 Base of the daily Bollinger band
SUP 2: $1.3201 Lows 22, 23 Apr
SUP 3: $1.3128 50% projection level
SUP 4: $1.3103 Minor support line from 18 Feb


Yen
The yen opened in early Europe around Y93.87 and Y125.59 vs the euro. Dollar-yen some decent flow going through in Asia both sides as Japanese exporters sold the pair down to Y93.73. Traders reported decent demand on the dip from a Trust Bank name speculating that the flow is related to the current round of Toushin launches, dollar-yen firmed as the bids soaked up the exporter supply and rallied to Y94.04 (the high) late in the Asian session.

Cross-yen was a little more volatile although again in a tightish range, euro-yen traded Y125.34-Y125.97 in Asia. The cross opened ahead of Y126.00 where offers at this level said to be for a mix of accounts but Japanese exporters included in those capped and the market pushed to the low Y125.34. With a lack of news and events the cross was confined to the range looking to the European session for some fresh impetus.

RES 4: Y95.09 61.8% retracement of 2009 decline
RES 3: Y95.05 Minor resistance line from Jan high. High 24 Aug 2009
RES 2: Y94.72/78 76.4% retracement of Aug/Nov decline, High 2 April
RES 1: Y94.37 High 26 April

CURRENT LEVEL: Y93.91

SUP 1: Y93.35/65 21, 5-day moving average
SUP 2: Y92.95 Tenkan line of the Ichimoku cloud
SUP 3: Y92.26 Minor support line 4 Mar
SUP 4: Y91.60/67 Low 19 Apr, 61.8% of 18 Mar to 2 Apr rally


Cable
Cable continues to hold above the 21-day moving average, now at $1.5330 as daily studies sit in neutral territory. This level should continue to be in focus as bears seek a close below, which could turn 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: $1.5645 100-day moving average
RES 3: $1.5620 50% of 2010 decline
RES 2: $1.5580/93 High 23 Feb, 38.2% of Nov/Mar move
RES 1: $1.5522 High 15 Apr, Bollinger band

CURRENT LEVEL: $1.5456

SUP 1: $1.5330 21-day moving average
SUP 2: $1.5163 50% retracement
SUP 3: $1.5130 Low 6 Apr
SUP 4: $1.5078 61.8% retracement of April recovery 


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