Monday, June 7, 2010

EURUSD Hits New 4 Year Lows

Briefing
The euro plunged to fresh 4-year lows against the dollar in Asian trade Monday and a fresh 8-1/2 year low against the yen, as ongoing concern over sovereign budgets continued to weigh. Euro-dollar slumped to a low at $1.1876 - a level below its first official closing level in January 1999, traders noted. However, short-covering helped the pair off the lows, touching $1.1938 ahead of the European open.

Euro-yen plunged to Y108.06, before rallying to Y109.12 ahead of Europe. The cross rally helped pull dollar-yen off session lows of 90.97, with the pair last at Y90.30 in early Europe. Sterling was little changed against the dollar, at $1.4440, as cable rallied off early lows at $1.4401, but made further ground against the weakened euro, with euro-sterling easing to stg0.82405, currently around stg0.8260.

The Eurogroup meets in Luxembourg Monday followed by the Economic and Financial affairs Council Tuesday. New Zealand is expected to hike 25bps Wednesday. BOE and ECB expected to keep rates on hold Thursday. Germany manufacturing orders are also due today, at 1000GMT.

Euro
Euro-dollar closed in NY around $1.1965 with traders noting the first print into Asia was at $1.1935 as stops below $1.1950 were targeted and triggered (NY low $1.1955). Rate consolidated for a short while between $1.1920/65 before coming under further pressure from strong sales out of Tokyo of euro-yen, prompted by the knock on effect of Wall Street's negative close on Asian equities. Rate dropped through $1/1900 to post initial lows at $1.1882, recovering to $1.1920/25 before another round of selling took it down to session/fresh 4-year lows of $1.1876.

Negative news articles over the weekend weighed on the euro, Der Spiegel article suggesting German Constitutional Court considering imposing an interim order against Germany's participation in the EU/IMF rescue effort, as well as the Telegraph suggesting 'the euro will be dead in 5-years'.Euro-dollar managed to recover post Tokyo fix, euro-yen failing to take out a Y108.00 barrier then bouncing, pushing back up to $1.1935/40 before settling between $1.1910/40 into early Europe. Strong demand noted at $1.1860/50 ($1.1850 barrier). Offers $1.1940/55.

RES 4: $1.2355 High 1 June
RES 3: $1.2340 21-day moving average
RES 2: $1.2145 Lows 18, 19 May
RES 1: $1.2100/10 5-day moving average, Breakout level

CURRENT LEVEL: $1.1901

SUP 1: $1.1880 200-month moving average
SUP 2: $1.1869 Support line 22 Dec
SUP 3: $1.1835 Minor channel base
SUP 4: $1.1825 Daily low 28 Feb


Yen
Dollar-yen continues on a soft footing in the earlier far east markets falling from a high of Y92.10 before a sharp sell off to Y90.97.Resistance now lies at the 100 MA coming in at Y91.50 and support at Y90.55 and then bids at Y90.10-20. Most of this has been cross related selling partly on the back of remarks in the UK's Sunday Telegraph that the euro could be 'dead within 5 years' with euro-jpy hitting Y108.06 in an attempt to trigger the Y108.00 barrier option before profit taking brought the cross back up to Y108.85-90.

Overall, the pair looks heavy with the November 2001 lows potentially coming into the picture at Y107.70 and Y106.88 on a break of the Y108 barrier. Japan's DPJ Noda has stated desire to set a path for fiscal reform but will not comment on euro levels. The Nikkei fell 380 pints to 9520 following the Friday fall in the US adding to the stronger overall yen move.

RES 4: Y93.56/63 Fibonacci level, High 13 May
RES 3: Y93.35 Top of the Ichimoku cloud
RES 2: Y92.60 55-day moving average
RES 1: Y91.80 5-day moving average

CURRENT LEVEL: Y91.37

SUP 1: Y91.00 Tenkan line
SUP 2: Y90.90 200-day moving average
SUP 3: Y90.56 Low 1 June
SUP 4: Y90.17 Support line 6 May


Cable
Opened Asia around $1.4440 and bounced between $1.4401/45 for most of the overnight session, taking direction from euro-dollar moves though held within a tighter range as euro-sterling extended its recent push lower to stg0.82405. Cable managed to break out on the topside to $1.4460 late Asia, dropped to $1.4430 into the European session before resting the late Asian session highs.

Rate currently trades around $1.4430. Resistance remains in place at $1.4460, a break to open a move on toward $1.4490, with offers noted from here and extending toward $1.4505. Support remains toward $1.4400, a break to expose stronger demand interest placed around $1.4370. BOE MPC interest rate decision Thursday, no change expected. UK releases the Inflation Attitudes Survey on Friday followed by the Quarterly Bulletin Sunday.

RES 4: $1.4878 50% of Apr/May range
RES 3: $1.4835 Top of the daily Bollinger band
RES 2: $1.4771 High 2 June
RES 1: $1.4550/65 5, 21-day moving average

CURRENT LEVEL: $1.4438

SUP 1: $1.4338 Minor support line
SUP 2: $1.4260 Low 25 May
SUP 3: $1.4234 Low 20 May
SUP 4: $1.4210 Base of the daily Bollinger band 


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Tuesday, June 1, 2010

Month End USD Demand Emerged - US and UK Markets Open Today

Briefing
Widely reported dollar buying did emerge at Monday's end month fixings, despite holiday thinned markets. Aussie saw the main pressure, with dollar demand also noted vs the euro, sterling and Cad.

The dollar pared gains through the North American session with risk aversion demand for dollars and yen emerging again into Asia. Markets reacted to the ECB Financial Stability Report which suggested that eurozone banks would suffer 'considerable' loan losses in 2010 and 2011.

Strong sales of cross yen led the moves, a 'fat finger' sell trade in the Nikkei adding to the weight. Euro-dollar filled reported demand at $1.2260, allowing rate to extend losses to $1.2245. Aussie lost 100 pts in early trade as it dropped to $0.8354, the move down aided by China's release of PMI data, seen suggesting some slowing. RBA left rates unchanged, as widely expected, adding that rates remain appropriate in the near term, allowing for some recovery.

BOC rate decision due at 1300GMT with market widely forecasting a hike of 25bps after Monday's release of strong GDP. Rates off lows into early Europe.

Euro
Opened in Asia around $1.2300, the rate having pivoted this level through Monday's holiday thinned trading. Rate posed an early session high at $1.2308 before coming under pressure, led by strong sales of cross yen, with traders reacting to release of the ECB Financial stability Report suggesting eurozone banks will suffer 'considerable' loan losses in 2010 and 2011, which could amount to E195bln in write downs. Weaker than expected China PMI and a sudden drop in the Nikkei (fat finger trade blamed) saw rate ease to challenge Monday's low at $1.2265, the break below $1.2260 tripping stops that took it to lows of $1.2245.

French bank buying emerged into the dip to help rate recover back above $1.2260, edging on to $1.2280 at writing. Support remains at $1.2245/35, an Asian sovereign suggested to have interest here, Stops $1.2230, a break to expose $1.2205/00. Resistance $1.2290/00, stops $1.2305/10, ahead of minor resistance at $1.2320/25, with stronger interest noted between $1.2330/35. Eurozone PMI releases due today, along with German employment data.

RES 4: $1.2929/50 50% of 12 April decline, High 7 May
RES 3: $1.2731/35 61.8% of 10 May, 38.2% of 12 April declines
RES 2: $1.2673 High 21 May
RES 1: $1.2490 21-day moving average

CURRENT LEVEL: $1.2263

SUP 1: $1.2135/45 50% of post-launch range, Low 19 May
SUP 2: $1.2050 Base of the daily Bollinger band
SUP 3: $1.2035 Lows April 2006
SUP 4: $1.1942/48 Low 14 Mar, 2006, Support line 22 Dec


Yen
Opened in early Europe around Y91.13 and Y111.78 Another quiet session overnight for dollar-yen trading in a Y90.88-Y91.28 range. The pair were sold off early in the session as continued worries over events in the Eurozone weighed and selling interest emerged in cross-yen markets. Euro-yen was sold from Y112.23 down to Y111.32 as many different accounts looked to short the cross. However decent buying interest around Y111.25 area helped the euro-yen find a base and the cross rallied back to Y112.20 level.

These moves were mirrored in dollar-yen with the pair trading down to Y90.88 marginally below yesterdays low, however with the demand in cross-yen and technical support being provided by the 200 dma at Y90.95 area the pair bounced modestly to open in Europe around Y91.13 level.

RES 4: Y92.65 Top of Ichimoku cloud
RES 3: Y92.50 55-day moving average
RES 2: Y91.85 Fibonacci level 21-day moving average
RES 1: Y91.45 Base of Ichimoku Cloud, 100-day moving average

CURRENT LEVEL: Y91.05

SUP 1: Y90.95 200-day moving average
SUP 2: Y90.85 5-day moving average
SUP 3: Y89.77 Support line 6 May
SUP 4: Y89.10 Base of the Bollinger band


Cable
Opened Asia at $1.4530 and initially edged up to mark session highs at $1.4542 before reversing on strong cross yen led sales. Rate eased to a low of $1.4470. Rate settled between $1.4470/95 before edging higher ahead of the European open, the rate pushing back up to $1.4530/35 before slipping back but remaining buoyed above $1.4500.

A break below the figure to open a deeper pullback toward $1.4485/80 ahead of $1.4460/50. Resistance remains at $1.4530/35 ahead of $1.4550. UK CIPS PMI due at 0828GMT.

RES 4: $1.5030/55 61.8% of Apr/May range, High 10 May
RES 3: $1.4878 50% of Apr/May range
RES 2: $1.4726/41 38.2% of Apr/May range, 61.8% of 10/19 May decline
RES 1: $1.4625 21-day moving average

CURRENT LEVEL: $1.4477

SUP 1: $1.4260 Low 25 May
SUP 2: $1.4234 Low 19 May
SUP 3: $1.4160 Current base of the daily Bollinger band
SUP 4: $1.4131 100% projection of May decline


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