NordMarkets Morning FX - October 28

MORNING FX
BRIEFING
The Aussie provided the early focus in Asia with release of CPI (broadly in line with expectations) taking Aussie-dollar up from $0.9180 to $0.9208 before reversing, the move down influenced by strong sales of Aussie-yen. Trade to lows of $0.9072 attracted strong ACB demand that lifted the rate back above $0.9100 into early Europe. These sales weighed on dollar-yen to take this rate through Y91.50 ((NY low Y91.71) to Y91.07, with cross yen sales providing a heavy tone. Asian currencies lost ground to a recovering dollar with central banks seen on top to contain volatility. Euro-dollar again saw decent Asian sovereign demand, providing the main impetus to edge back above $1.4800, from lows of $1.4789, extending the recovery from NY lows at $1.4769. Cable retained a buoyant tone, holding well above Tuesday's pullback lows at $1.6311. Norges Bank in focus, with most expecting a hike of 25bps, the accompanying comments to be of more interest. German CPI state data to begin today. US durable goods and new home sales to provide afternoon interest.

EURO
Euro-dollar closed the NY session around $1.4800/05, having recovered off session lows of $1.4769 ($1.4772 50% $1.4480/1.5064) to $1.4821 ahead of the close. Rate initially squeezed down to $1.4789 before meeting ACB demand interest. This buying, along with dollar sales emanating from downside pressure on dollar-yen, acted to take rate up to session highs of $1.4828. Offers placed ahead of $1.4830 kept the rate capped into Europe, the break above into the session allowing it to edge on to $1.4840. Rate currently trades around $1.4830. Offers seen placed between $1.4840/50, a break above to open a move toward $1.4865/70 ahead of $1.4900, though one Asian trader has noted that funds have been more than willing to sell into the ACB inspired recovery. Support now seen back toward $1.4800, with stronger interest noted between $1.4770/60. A break here to $1.4740 with stops placed on a break below. Further demand $1.4725 with talk of short entry sell orders placed on a break below. One trader has suggested that the break of $1.4760 exposes $1.4680.

The euro sees a bear-cross in the daily Stochastic study and another potential cross on 10-day momentum as the pair attempts to sustain a break of the 21-DMA at $1.4825 to turns bear's focus to Fibonacci retracements at $1.4772 and $1.4703. Bulls now need a break above $1.5060/64 to get back in control, although initial resistance is $1.4905/30.

RES 4: $1.5163 76.4% of $1.6039 to $1.2329
RES 3: $1.5080/10 Top of the daily Bollinger band, 1% MAE
RES 2: $1.5060/64 Potential double-day high 23, 26 Oct
RES 1: $1.4905 5-day moving average

CURRENT LEVEL: $1.4812

SUP 1: $1.4769 Low 27 Oct, 1% moving average envelope
SUP 2: $1.4772 50% retracement of the October advance
SUP 3: $1.4703 61.8% retracement of the October advance
SUP 4: $1.4625 2% moving average envelope


YEN
Dollar-yen closed a muted US session Tuesday around the Y91.80 level, with euro-yen again under sell pressure, slipping to Y135.66 and closing just off the lows. Early Asian demand for yen crosses proved to be temporary as exporters sold Aussie-yen in particular, taking dollar-yen back from Y91.81 to trigger stops through Y91.50. Model funds were euro-yen sellers as stops were hit in this pair through Y135.45 down to initial lows near Y135.20. Subsequent bounces were short-lived, dollar-yen extending the lows down to Y91.07 into the Asian afternoon as euro-yen dropped down to Y134.84. Traders noted strong Japanese data adding fuel for yen bulls as retail trade came in at +0.9% m/m, with the y/y rate at -1.4% versus -1.8% previous. European dealing opens with dollar-yen climbing back towards Y91.40, traders now seeing decent-sized stops building on a break below Y91.00, while techs note the failure to hold within the Ichimoku Cloud yesterday. Bids seen coming in around the Y90.80 area, while light offers are at Y91.50, more at Y91.80 and Y92.30/50.

The daily stochastic is poised for a bear-cross in dollar-yen as the market pulls back. However, the market remains above the base of October's rising channel at Y90.51. Initial support is the Tenkan line of the Ichimoku cloud at Y90.80, while initial resistance is at the 5-day moving average at Y91.75 and the Y92.32 high. Euro-yen has pulled back after testing the bull-flag target and the daily stochastic is now seeing a bear-cross. Main Fibonacci levels are Y134.90, which is coming under pressure, and Y133.80, which matches Ichimoku levels and moving average level. Initial resistance is the Tenkan line of the Ichimoku cloud, at Y136.00 and 5-DMA at Y136.80.

RES 4: Y94.00/05 Ichimoku Cloud top, 61.8% retracement of Aug/Oct decl
RES 3: Y93.30 High 7 Sep, 100-day moving average
RES 2: Y92.90 50% retracement of Aug/Oct decline
RES 1: Y92.53/64 Failure high 21 Sept, Projected channel top from 8 Oct

CURRENT LEVEL: Y91.16

SUP 1: Y90.51/68 Support line 8 Oct, 38.2% of October rally
SUP 2: Y90.15/25 Kijun & 21-day moving average
SUP 3: Y90.09/17 Low 20 Oct, 50% of October rally
SUP 4: Y89.66 61.8% retracement of October rally


CABLE
Opened Asia around $1.6378 with rate influenced by the early CPI react rally in Aussie, edging to an early high of $1.6406.Rate reversed off highs, the move down seen in line with Aussie as both Aussie-yen and sterling-yen came under pressure out of Tokyo, cable pressed to lows of $1.6338, though traders reported that sterling continues to enjoy an underlying buoyant tone, though just off recent pullback lows of $1.6251, seen after last Friday's release of poor UK GDP. Cable bounced between $1.6330/35 and $1.6380/85 through the balance of the session, currently trading around $1.6370 in early European dealing. Offers remain in place between $1.6380/85,a break above to open a move back toward $1.6400/05. Support $1.6335/30, a break to allow for a retest of Tuesday's pullback area between $1.6315/10 ahead of $1.6295/85 area. Stops noted below $1.6280, which if tripped to expose recent pullback lows of $1.6251, with bids seen to $1.6250.

The bearish engulfing pattern in cable as well as the bear-cross in the stochastic turned bear's attention to Fibonacci retracements of the $1.5708 to $1.6694 rally from $1.6201 and the $1.6115/60 support area, which starts with the 21-DMA. While $1.6251 remains the low, upside retracements are $1.6474, $1.6526. Euro-sterling is pulling back further from the 21-DMA but signals from daily studies are not convincing, with the stochastic and momentum studies bouncing along the lows.

RES 4: $1.6726/40 76.4% retracement of $1.7041-$1.5708, High 11 Sep
RES 3: $1.6680/95 Current top of the daily Bollinger band, High 23 Oct
RES 2: $1.6526 61.8% retracement
RES 1: $1.6440/73 Hourly high, 50% of 23 Oct decline

CURRENT LEVEL: $1.6361

SUP 1: $1.6240 Low 19 Oct
SUP 2: $1.6201 50% retracement of the October recovery
SUP 3: $1.6160 21-day moving average
SUP 4: $1.6115/34 High 8 Oct, Low 1 Sep, Spike 30 Sep, Low 21 Sep



MORE
Dec Bunds opened down 2 ticks Wednesday at 121.50, but reversed direction after strong gains towards the Chicago close after stellar 2-year Note auction and stronger than expected Australia CPI data. Focus is on supply from Germany, which includes re-opening of the 2.5% Oct 2014 Bobl 155 and 1.75% Apr 2020 BUNDei issue for combined size of E7.0bln. US sells $41.0bln 5-year Note auction. Also eyed is German state CPI data and Norges Bank is set to become the first European central bank to pull the rate hike trigger by 25bps to 1.50%.

DAILY CALENDAR
European data for Wednesday started at 0700GMT with German import prices, which fell 0.9% on the month in September, bringing the annual change to -11.0%. Energy costs fell back 5.7% on the month and plummeted 38.1% year-over-year. Export prices declined 0.1%, leaving the annual fall at 3.2%.

This is followed at 0830GMT by the Italian ISAE business survey. At 0900GMT, the ECB is due to publish the Euro area bank lending survey. Also in Europe today, the flash German HICP data for October is due after all the states have reported, with forecasts of unchanged m/m, -0.2% y/y.

In the UK, September Land Registry House Prices are due, at 1100GMT. US data starts at 1100GMT with the weekly MBA Mortgage Application Index, which is followed by Durable Goods Orders at 1230GMT, which are expected to rise 1.5% in September after the revised 2.6% drop in August. Boeing reported 20 orders in September, down from the 32 reported in August.

In Norway, the Norges Bank announces its monetary policy decision at 1300GMT, which is followed by a press conference. Overall, the market is looking for a 25bps hike to 1.50%, although there is a chance of a 50bps rate hike. One leading reason deterring a 50bps move is the recent Nok strength. The focus is also on the Monetary Policy Report and, in particular, the new projected path of policy rates to gauge how much more rate hikes will be likely into 2010. All in all, the Norges Bank is seen as likely to be the first European central bank to pull the rate hike trigger.

US data continues at 1400GMT, when new home sales are expected to rise further to a 440,000 annual rate in September after rising modestly in August to the strongest pace in nearly a year.

This is followed at 1430GMT by the weekly Crude Oil Stocks data.



Best Regards,

NordMarkets.com

NordMarkets Morning FX

MORNING FX
BRIEFING
European open; Release of stronger than forecast UK RICS housing data (+10.4% vs expected 0.0%) gave sterling a boost, the demand taking cable back above $1.6600, from its opening level around $1.6578, to session highs of $1.6629. Sterling remains firm into early Europe though some suggest this could be tempered ahead of UK inflation data release at 0830GMT, while others point to the report in the FT that legislation to force UK banks to draw up 'living wills' could also weigh if other countries don't follow suit. The move in sterling gave risk on trades an early lift, euro-yen tripping stops through Y133.10 took this rate to Y133.34, in turn moving euro-dollar back to $1.4647 (NY $1.4654) before meeting headwind Asian sales. Dollar-yen attempted to track euro-yen higher but was met by CTA and short term model sales, reversing in line with euro-yen on life co. sales, though pension fund demand cushioned the move lower. RBA Minutes seen balanced, in a 'wait and watch' mode. UK inflation data t 0830GMT, followed by Germany ZEW at 0900GMT the morning's focus ahead of US PPI and key retail sales at 1230GMT.

EURO
Opened Asia around $1.4627, off NY highs of $1.4654, and initially edged up to post session highs at $1.4647, as rate tracked cable's push higher on the back of the release of stronger than expected UK RICS data, with the break above Y133.10 in euro-yen also aiding the early move. Reports of Asian sellers placed above $1.4650 discouraged further upside progress, with talk of Asian sovereign book balancing sales also providing supply. Rate sank back to $1.4604 as euro-yen was squeezed off its early highs by life company sales. Euro-dollar drifted higher through the balance of the session, edging back to $1.4634 ahead of the European open, currently trading around $1.4632. Offers remain in place between $1.4650/60, a break above to open a move toward $1.4700 with offers ahead of this level suggested to begin from around $1.4685, with interim interest noted at $1.4672 (1.618% swing of $1.4647/04). Bids remain in place toward $1.4600.

YEN
Correction of yen longs continued into early Asian trade Tuesday, the early triggering of stops through Y133.10, from an opening level around Y132.80, providing the impetus to take euro-yen to early highs of Y133.30. The move dragged dollar-yen through Monday's high at Y91.14, triggering stops at Y91.20 to take it on to Y91.23, but rally met decent headwind resistance from CTA and short term model supply. Euro-yen reversed on Japanese life company sales to Y132.88, though move down was tempered by reported buys from a Japanese pension fund, along with importer interest, the rate recovering back ahead of the European open to Y133.34. Dollar-yen eased back, finding support ahead of Y91.00 in Asia, with early Europe seen probing for stops below the figure. Dollar-yen demand seen in place toward Y90.80/70, a break to allow for a deeper move toward Y90.50. Resistance remains in place above Y91.20 through to Y91.30 with reported stops above. If stops triggered expected to meet further sell interest placed between Y91.40/50, with talk of further sell interest dotted toward Y92.00

USDYEN - TECHNICALS
Dollar-yen downside so far arrested at potential double-day low reversal at Y90.18/21, but downside risks remain whilst below Y91.30/75 -- 5-day moving average and Tenkan line of Ichimoku cloud. The dly studies whilst o/sold, are still well above extreme levels of reversal - thus imply plenty of downside scope. Risk seen to Y89.81 proj channel.

RES 4: Y95.31/33 Base of the Ichimoku cloud, 100-day moving average
RES 3: Y94.75 200-day moving average
RES 2: Y93.17 21-day moving average
RES 1: Y91.53/75 5-day moving average, Tenkan line of Ichimoku cloud

SUP 1: Y90.18/21 Double-day low Sept 11, 14
SUP 2: Y89.67/81 50% proj of the Aug/Dec downmove, Proj channel base
SUP 3: Y87.12 Major lows Dec/Jan
SUP 4: Y86.05 Monthly high June 1995



EURUSD - TECHNICALS
Euro has hit fresh 2009 highs against the dollar and has broken decisively above $1.4622 -- 61.8% retracement of the 2008 decline. The "shooting star" candlestick on Friday has been negated and very little resistance seen until $1.4708/47, where the former is the 2.00% moving average envelope and latter the spike high on Dec 18. Daily studies are bullish.

RES 4: $1.4968 Major high Nov 2007
RES 3: $1.4908 High Aug 22 2008
RES 2: $1.4851/62 100% projection of the Q4 2008 rally, High 22 Sep
RES 1: $1.4708/21 2.00% moving average envelope, High 18 Dec

SUP 1: $1.4565 5-day moving average
SUP 2: $1.4504 Low 10 Sept
SUP 3: $1.4447 August high
SUP 4: $1.4332 21-day moving average



GBPUSD - TECHNICALS
Cable suffered a minor test of a 9-day support line yesterday, but risks remains skewed lower following failure at $1.6742 and the potential "shooting star" candlestick formation on Friday. The $1.6742 was also the June top and failure to break above here perhaps puts attention back on channel base from early June at $1.6163.

RES 4: $1.7116 50% projection of April/June advance from July base
RES 3: $1.7044/52 High 5 August, November 2005 low
RES 2: $1.6822 76.4% of August pullback
RES 1: $1.6706/16 Daily Bollinger band top, Res line from July 2008 high

SUP 1: $1.6501/33 38.2% of $1.6115 to $1.6740, Support line fm 2 Sept
SUP 2: $1.6414/29 21-day moving average, 50.0% of $1.6117 to $1.6740
SUP 3: $1.6324 Low 4 Sept
SUP 4: $1.6239 Minor low 3 Sep




EURYEN - TECHNICALS
Euro-yen has suffered a minor test of the daily Bollinger band base at Y131.57 before recovering. However, downside risks persist following break of uptrend from Jan 21 on Friday. Overall, the cross remains below 1-month channel top at Y133.81 and whilst below here, the risk is on weakness towards the 200-DMA & channel base at Y128.58.

RES 4: Y136.08 High 24 August
RES 3: Y134.85 Kijun line of Ichimoku cloud
RES 2: Y133.81/83 Resistance line from 10 Aug, High 11 Sept
RES 1: Y133.12 Ichimoku cloud base

SUP 1: Y131.08/57 Low 2 Sept, Daily Bollinger band base
SUP 2: Y129.05 200-day moving average
SUP 3: Y128.58 Projected channel base from Aug 10 high
SUP 4: Y127.01/03 Low 18 May, 8 July

DAILY CALENDAR
European data kicks off at 0600GMT, with the release of the ACEA Jul/Aug new car registrations

French data is next up. At 0645GMT, the France Aug HICP, CPI data is released, followed at 0650GMT by the France Jul current account balance.

At 0700GMT, German Economics Minister Karl-Theodor zu Guttenberg, German Industry Association (BDI) managing director, Werner Schnappauf, German Association of Industry and export conference, are slated to speak in Berlin

The calendar continues at 0830GMT, with the release of German Wholesale and Export Association (BGA) releases new wholesale forecasts, in Berlin

The UK calendar kicks off at 0830GMT, with the release of the August CPI data. Annual CPI inflation should fall further below the BoE target for the third consecutive month in August before bottoming out in September. Utility bills are likely to play a key in role in pushing down on prices in August given the rise in gas and electricity bills this time last year will begin to drop out of the annual measure. This favourable base effect should continue in September. The market is looking for a 0.3% m/m rise, up 1.4% y/y in the CPI reading.

At 0845GMT BOE Governor King, along with Dep Governor Bean and MPC members Barker, Dale, Miles are in Parliament at TSC hearing, to be quizzed on the August Inflation reports. Taking centre stage will likley be the decision of King, Besley and Miles to vote for increased QE in August, and the reasons the other MPC members voted them down.

The calendar continues at 0830GMT, with the release of German Wholesale and Export Association (BGA) releases new wholesale forecasts, in Berlin

At 0900GMT, EMU 2Q labour cost data is released, along with the much-watched Germany Sep ZEW. The market is looking for a ZEW read of 60.0, up from 56.1 in August.

Also due Tuesday morning is the annual statement on the eurozone economy from the European Commission Directorate-General for Economic and Financial Affairs.

The US calendar kicks off early, with the release of the ICSC-Goldman Store Sales for the Sept 12 week.

Bundesbank board member Hans-Helmut Kotz speak at conference in Berlin speaks at 1200GMT

The US calendar kicks off early, with the release of the ICSC-Goldman Store Sales for the Sept 12 week. The main US data is due at 1230gmt, with the release of the August Producer Price Index, Retail & Food Sales data and the NY Fed Empire State Survey.

Also due at 1230GMT is the Canadian new motor vehicle sales for July. At 1255GMT, the US Redbook Average for the September 12 week is released.

Back in Canada, at 1330GMT, Bank of Canada Deputy Gov. John Murray is scheduled to give a speech on the crisis and Canada's near-term prospects in Berlin.

The US calendar continues at 1400GMT, when Federal Reserve Chair Ben Bernanke gives a speech on the year of crisis to the Brookings Institution in Washington.

At 1400GMT, the US Business Inventories data for July is released. Alsoa t 1400GMT, the World Bank releases its 2010 World Development Report

Back in Europe, at 1500GMT, the ECB Executive Board member Juergen Stark gives a speech on "Monetary and fiscal policy: criteria and timing for the phasing out of crisis measures", in Berlin

The US calendar ends at 2100GMT, with the release of the ABC News Survey for the week ending Sept 13.



Best Regards,

NordMarkets.com