Tuesday, May 4, 2010

Euro Under Pressure Once Again

Briefing
The dollar was mixed in Asia Tuesday making headway against the yen but relatively unchanged against the Euro. Trade was light as Japanese markets are closed today as part of a 3 day holiday in Japan.

The euro is under pressure once again in early European trade down to $1.3171 from the $1.3205 level after spending the Asian session in a $1.3185-$1.3214 range. The early sell off appears to be related to continued concerns over events in Greece and the rest of the Eurozone as investors look to trim their exposure to European risk.

Dollar-yen is rallying early in the European session as reports of option knockouts and stops in the pair starting from Y95.00 running through to Y95.30 ensure that the pair remains bid. Traders note once the Y95.00 level gives way their is not much in the way of offers or resistance till Y96.00

Euro
Euro-dollar opened in early Europe around $1.3207, having been almost flat overnight in Asian trade holding around $1.3200 as the markets moved into the European open. It had been a quiet session for the euro trading in a $1.3185-$1.3214 range, traders noting hedge fund names buying in the early part of the Asian session around the $1.3190-$1.3200 level. Speculators were noted sellers on the rally, said to be reacting to headlines in the Wall Street Journal that Greece's costs exceed bailout.

However the knee jerk reaction was not followed up and the pair settled just above $1.3200. The euro was pulling off of the highs into early European trade as continued concerns over Greece and the rest of the eurozone weighed. Continued speculation of a large barrier located at $1.3100, which is said to be linked to an ACB should ensure there will be plenty of trade ahead of this level with chatter of stops building behind.

RES 4: $1.3510 55-day moving average
RES 3: $1.3464 Channel top 3 Dec
RES 2: $1.3400 High 22 Apr, 21-day moving average
RES 1: $1.3365 High 30 Apr

CURRENT LEVEL: $1.3203

SUP 1: $1.3114/28 Low 28 Apr, 50% projection level
SUP 2: $1.3067/80 Support line from 18 Feb, Bollinger band
SUP 3: $1.3057 38.2% retracement of $0.8232 to $1.6039
SUP 4: $1.3022 Projection calculation from Dec, Jan downmoves


Yen
The yen opened in early Europe around Y94.86 and Y125.31 vs the euro. Dollar-yen was higher once again in early Asian trade, up from Y94.57 to Y94.99 as some more stops were triggered in the pair on a break of Y94.80. Traders report there are more lying in wait starting from Y95.00 through to Y95.30 with very large located at Y95.15 as medium term prop accounts and system funds exit shorts. Sales ahead of the Y95.00 level are said to be linked to option barrier defence whilst more stops build behind.

Euro-yen was mixed after initially rallying early in the Asian session due to the move higher in dollar-yen, trading from Y124.72 to Y125.46. however the strength was short lived as option related offers in dollar-yen and sales in euro saw the cross sold off trading down to Y124.87 in early European trade as some weak longs were flushed out on a move sub Y125.00.

RES 4: Y97.52 76.4% retracement of Y101.44 decline
RES 3: Y96.03 Minor resistance line 27 Oct
RES 2: Y95.14 Resistance line from 7 Jan
RES 1: Y95.05/09 High 24 Aug, 61.8% retracement of 2009 decline

CURRENT LEVEL: Y94.87

SUP 1: Y94.30 5-day moving average
SUP 2: Y93.45/70 21-DMA, Tenkan line of the Ichimoku cloud
SUP 3: Y92.75/81 Low 22 Apr, Minor support line 4 Mar
SUP 4: Y91.60 Low 19 Apr


Cable
Cable pulled back to the 21-day moving average, although the daily stochastic remains soft and the recent bear-cross of the 5 & 21-DMAs is still evident, so this level ($1.5340) may continue to cap recoveries. The recovery also saw the market trade back into the daily Bollinger band, the base of which moves to $1.5170.

Euro-sterling studies are seeking a base as the cross remains within the falling channel, which has dominated from the start of March. The stochastic risks a bull-cross to help bulls target Fibonacci resistance at stg0.8734/65, while the top of the channel meets the 21-DMA at stg0.8736.

RES 4: $1.5595 100-day moving average
RES 3: $1.5580 High 23 Feb
RES 2: $1.5515/22 Bollinger band, High 15 Apr
RES 1: $1.5340 21-day moving average

CURRENT LEVEL: $1.5264

SUP 1: $1.5126/30 Low 28, 6 Apr

SUP 2: $1.5078 61.8% retracement of April recovery
SUP 3: $1.4802 Low 25 Mar
SUP 4: $1.4783 Low 1 Mar

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