Tuesday, June 1, 2010

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

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.

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


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

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


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

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


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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