Monday, June 7, 2010

EURUSD Hits New 4 Year Lows

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-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


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

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


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

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


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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