Australia Keeps Interest On Hold

Briefing
The greenback was narrowly mixed in the Asia, ending close to the middle of trading ranges against the majors as the RBA surprised markets as it left rates on hold (+25bp had been widely forecast). The Aussie fell sharply from around $0.8925 to a low of $0.8823 almost immediately after the RBA decision, extending the low to $0.8782. The move triggered a broad unwinding in risk positions, and euro-dollar came unhinged along with that, falling to a $1.3886 low after spending most of the morning between $1.3908/36.

However, the pair rallied to $1.3925 ahead of the European open. Aussie-yen fell below Y80.00 for a low of Y79.65, and that initially triggered a retreat in dollar-yen. Dollar-yen was at Y90.80 in early Europe, having been as low as Y90.58, with some speculative demand in the recovery seen prompted by Japan Kamei comments suggesting Japan Post diversification. Euro-yen had lifted to an early high of Y126.61 before it too fell back on the RBA decision, dropping to Y125.86. Euro recovery in early Europe sees rate back at Y126.40.

Euro
Euro-dollar opened Asia around $1.3930 and got an early lift from cross yen demand taking it up to session highs of $1.3937. Decent sell interest placed ahead of $1.3940 capped the move and saw it ease back to $1.3910. The RBA's surprise decision to keep rates unchanged (most had forecast a hike of 25bp) prompted a paring back in risk positions with euro-dollar dropping down to $1.3886. Rate recovered on the back of reported European demand, lifting back above the figure ahead of the European open and extending move to retest earlier highs at $1.3937, before again meeting that same resistance from offers placed ahead of $1.3940.

A tightening in Greek bonds to German bunds seen aiding euro's buoyant tone, with traders also reporting decent buys seen from a US investment house in Asia. Tech traders have suggested that rate needs to move above $1.3940 to boost recovery hopes going forward, following a 5-day series of lower highs. Rate currently trades around $1.3926. A break above $1.3940/50 to open a move toward $1.3988 (Jan 28 high) with sell interest noted from here and extending toward $1.4000.

RES 4: $1.4240 21-day moving average
RES 3: $1.4195/18 High 25 Jan, Low 22 Dec
RES 2: $1.4032 Low 21 Jan
RES 1: $1.3945 5-day moving average

CURRENT LEVEL: $1.3926

SUP 1: $1.3853 Low1 Feb
SUP 2: $1.3825 Low 22 June
SUP 3: $1.3790/01 Current Bollinger band base, 50% of March/Dec rally
SUP 4: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June

Yen
Dollar-yen failed to break out of its recent range highs overnight. The pair traded up to Y90.92 (recent high Y90.93) on the back of a Financial Times report quoting Japan's banking minister Kamei as saying Japan Post should buy more corporate bonds and US Treasuries rather than JGBs. However the strength was short lived as the RBA kept rates on hold despite an expectation of a hike.

This saw some Aussie-yen sales hit the market and drag the dollar-yen down to Y90.60 area coupled with some euro-yen sales (down to Y125.86). Traders say that there is still good resistance at Y91.00 for the time being although stops are said to be building behind. Support is seen at Y90.55 previous breakout point and treble bottom on the intra-day chart since the break higher.

RES 4: Y92.65/75 High 11 Jan, 200-day moving average
RES 3: Y91.87/05 Highs 21 Jan, 14 Jan
RES 2: Y91.50 Kijun line of the Ichimoku cloud
RES 1: Y90.93/10 Recent highs 29 Jan/2 Feb, 21-day moving average

CURRENT LEVEL: Y90.76

SUP 1: Y89.14/35 Low 27 Jan, Top of the Ichimoku cloud
SUP 2: Y88.95 Low 18 Dec
SUP 3: Y88.55 Base of the Ichimoku cloud
SUP 4: Y88.24 61.8% retracement of the 26 Nov rally

Cable
Opened Asia around $1.5958 with rate restricted to an early range of $1.5940/65 before pushing up to post session highs at $1.5975 before dropping back to $1.5920 as markets reacted to the surprise no rate change by the RBA. The move overtook euro-dollar's negative reaction to the decision, allowing euro-sterling to recover off early dip lows of stg0.87095, rallying back to stg0.87405.

Cable recovered, meeting resistance ahead of $1.5950 in Asia before getting a lift on to $1.5955/60 into early Europe before again dropping back, finding support this time around $1.5925. Rate currently trades around $1.5945. Offers reported in place between $1.5975/80 with stops above. Support remains at $1.5920 ahead of $1.5900.

RES 4: $1.6235/75 200, 55 & 100-day moving average
RES 3: $1.6150 21-day moving average
RES 2: $1.6040/80 5-day moving average, Low 22 Jan
RES 1: $1.5986 Intra-day gap top from 29 Jan

CURRENT LEVEL: $1.5939

SUP 1: $1.5833/50 Low 30 Dec, Low 1 Feb, Base of daily Bollinger band
SUP 2: $1.5770/85 Low 28 Sep, 2% moving average envelope
SUP 3: $1.5749 38.2% retracement of $1.3659 to $1.7041
SUP 4: $1.5708/21 Low 13 Oct, High Dec 2008 & 50% of $1.44 advance

Market Remains Cautious on Risk
BRIEFING
Euro-yen sank to fresh 9-month low of Y124.50 in early Asian trade, the move down led by sales of Aussie-yen as the market supposedly reacted to weekend comments from FSA Head Lord Turner signalling a crackdown on carry trades. The move dragged dollar-yen through rumored stops around Y89.85 to a low of Y89.76. Although dollar-yen rebounded smartly soon after, euro-yen remained depressed near Y124.80/90 through much of the morning, before rallying to Y125.43. Dollar-yen's recovery saw it hit a high of Y90.39, as specs sought shelter in the dollar and as the euro was shunned against a backdrop of rising risk-aversion and persistent worries about euro-zone debt. Late on, euro-dollar was at $1.3875, near the top of the session's $1.3852/88 range (defence of an option barrier at $1.3850 cushioned the lows).

The market remains wary of risk assets with direction to again be dictated by equity market action. Data highlights today include Eurozone and UK manufacturing PMIs ahead of US PCE and ISM data later on. In view this week are rate decisions from the RBA (+25bp expected), Norges Bank (pause in recent hiking cycle), BOE (halt in asset purchase prgramme in Feburuary), ECB (no change). US jobs data is the main focus, released Friday.

EURO
Euro-dollar opened Asia around $1.3862 (NY low) and was under pressure in early trade on strong euro-yen selling. Move suggested to have been prompted by market reaction to weekend comments from UK FSA Head Lord Turn 'signalling' a crackdown on carry trades, which triggered early sales of Aussie-yen. A major US name was linked to early heavy sales but move ran into decent demand placed ahead of a reported barrier at $1.3850 which cushioned the move at $1.3853. Reversal in euro-yen (Aussie-yen bounced away from its 200 day m/a at Y79.12, Y79.00 low) took euro-dollar back to $1.3888.

Rate eased back to retest the early lows, getting rejected again with recovery this time passing through the earlier Asian highs into Europe, extending to $1.3895. Rate currently trades around $1.3892. Offers seen placed between $1.3900/10, more toward $1.3920 ahead of $1.3940/50. Support remains ahead of the mentioned barrier at $1.3850, with stops placed on a break of $1.3845. Stronger demand expected to emerge between $1.3835/25 ahead of $1.3800 (50% $1.2455/1.5144).

Government bond supply this week in the eurozone is due from France, Germany, Spain and the Netherlands and is expected to ease to E22.0bln vs E27.8bln last week.

RES 4: $1.4265 21-day moving average
RES 3: $1.4195/18 High 25 Jan, Low 22 Dec
RES 2: $1.4032 Low 21 Jan
RES 1: $1.3975 5-day moving average

CURRENT LEVEL: $1.3884

SUP 1: $1.3820 Current base of the daily Bollinger band
SUP 2: $1.3825 Low 22 June
SUP 3: $1.3801 50% retracement of March/Dec rally
SUP 4: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June

YEN
Took some light buy stops out in Friday's trade but ran into good offers layered between Y90.80-Y91.00 posting a high of Y90.93. The market has tested lower briefly overnight, Y89.76 the low, as selling pressure in Asian trade (notably Aussie-Yen) came in after a UK Telegraph report that the head of Britain's Financial Supervisory Authority was looking to crack down on carry trades by limiting leverage for such activity.

The dip was short lived however as models and Japanese retail names sold yen. The pair now trades back to Y90.35 as the dollar buying continues ahead of good support in the Y89.00-Y89.30 zone (50% Fibonacci retracement and Ichimoku Cloud Support). Initial resistance on the topside is at Y90.40 (highs in the Asian session) and then stronger resistance at Y90.93 (Fridays high).

RES 4: Y92.65/80 High 11 Jan, 200-day moving average
RES 3: Y91.87/05 Highs 21 Jan, 14 Jan
RES 2: Y91.15/50 21-day moving average, Kijun line
RES 1: Y90.55 Recent highs 22/28 Jan, Tenkan line of the Ichimoku cloud

CURRENT LEVEL: Y90.23

SUP 1: Y89.14/30 Low 27 Jan, Top of the Ichimoku cloud
SUP 2: Y88.95 Low 18 Dec
SUP 3: Y88.55 Base of the Ichimoku cloud
SUP 4: Y88.24 61.8% retracement of the 26 Nov rally

CABLE
Opened the Asian session around $1.5950, off from its late NY posted low at $1.5983, with rate coming under early cross yen led pressure that took it on to $1.5936. Recovery in cross yen led cable up to highs of $1.5993 before momentum faltered and rate eased back to retest lows as markets tracked Asian equity markets lower. Fresh demand emerged at the base allowing rate to slowly recover through the balance of the Asian session, pushing back to $1.5975/80 into early Europe.

Recovery presented stale longs an exit with rate quickly dropping back to $1.5950. Support seen at $1.5950, a break to allow for another challenge on $1.5936. Below here and rate can squeeze on to $1.5915 with bid interest suggested to begin from here, strengthening toward $1.5900 ($1.5896 Jan7 and 2010 low). Resistance $1.5980 (76.4% $1.5936/93), more from that early high at $1.5993 through to $1.6000.

RES 4: $1.6270/80 100, 55-day moving average
RES 3: $1.6230 200-day moving average
RES 2: $1.6160 21-day moving average
RES 1: $1.6080 5-day moving average, Low 22 Jan

CURRENT LEVEL: $1.5957

SUP 1: $1.5898 Low 7 Jan
SUP 2: $1.5833/50 Low 30 Dec, Current base of daily Bollinger band
SUP 3: $1.5770 Low 28 Sep
SUP 4: $1.5708 Low 13 Oct

EURO WEAKNESS CONTINUES

BRIEFING
Euro weakness was the initial focus in Asia, as euro-dollar fell through the $1.4000 level to a $1.3935 low. Euro-dollar last traded below the psychological $1.4000 level on July 8 9$1.3838). Stops below $1.3985 and $1.3950 were taken out mid-morning, the pair hitting $1.3930 lows, bouncing back sharply to $1.3970/80 before stabilizing. It was trading back slightly above the $1.4000 level late in the session at $1.4005.

The dollar initially lost steam against the yen, ending the New York session around the Y90.00 level, beginning Tokyo around Y89.86 and winding up the morning around Y90.26. Euro-yen was generally well bid through the session, risk boosted by positive stocks with move to Y126.73 extending dollar-yen gains to Y90.40. The Kiwi barely budged after the Reserve Bank announced it would keep rates at a record low 2.5% and made no change to its post-meeting economic statement, though did manage to post an eventual high at $0.7107. Cable buoyed as euro-sterling broke under support at stg0.8650, rate holding around $1.6200. Further UK oil company demand expected.

EURO
Opened Asia around $1.4020, off NY lows at $1.3993, and edged up to $1.4040 in early trade on euro-yen led demand. Model and macro funds provided the main counter to the early rise, easing the rate back to retest the NY lows. News of further N.Korea artillery action off the coast of S.Korea, along with reported comments from PBOC official warning of the dangers of dollar carry trades, provided the catalyst for further selling with triggered stops through $1.3985 providing the weight to trigger option knock out levels at $1.3990, $1.3980, $1.3970, $1.3950 and $1.3930.

Rate touched $1.3930 before snapping back to $1.3965 bid in a breath. Rate recovered back above $1.4000 to $1.4020/25 before settling between $1.4005/20 ahead of Europe. Rate currently trades around $1.4020 in early European dealing. Asian talk of Asian sovereign demand aiding the recovery may have placed blame on the wrong person, some linking interest to a monetary authority, adding that same name may have sell interest now above the market. Offers $1.4020/25, $1.4040/50. Support $1.3985/80, $1.3950 and $1.3930.

RES 4: $1.4447 Low 14 Jan
RES 3: $1.4310/30 21, 200-day moving average
RES 2: $1.4195/18 High 25 Jan, Low 22 Dec
RES 1: $1.4090 5-day moving average

CURRENT LEVEL: $1.4016

SUP 1: $1.3960 Current base of the daily Bollinger band
SUP 2: $1.3902 Minor support line 3 Nov
SUP 3: $1.3801/25 50% retracement of March/Dec rally, Low 22 June
SUP 4: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June

YEN
Dollar-yen and cross yen opened Asia on a bid tone, with markets upbeat following Obama's State of the Union speech (no bank bashing seen boosting risk). Dollar-yen pushed to a high of Y90.40, from opening lows around Y89.88, with offers placed toward Y90.50 seen providing a cap.

Euro-yen pushed to an early high around Y126.45 from the low Y126's, dropping back to Y125.90, as euro-dollar fell back on triggered option stops, before recovering back to post highs at Y126.73 as risk trades remained in favour on positive equity markets. Yen retains a soft feel into early Europe, dollar-yen currently trading around Y90.35, euro-yen at its overnight highs of Y126.73. Dollar-yen offers to Y90.50, stops on break of Y90.60. Support Y90.00/89.90. Euro-yen offers Y126.80, Y127.40/50. Support Y126.00/125.90.

RES 4: Y92.65/85 High 11 Jan, 200-day moving average
RES 3: Y91.87/05 Highs 21 Jan, 14 Jan
RES 2: Y91.40/50 21-day moving average, Kijun line
RES 1: Y90.55 Recent highs, Tenkan line of the Ichimoku cloud

CURRENT LEVEL: Y90.28

SUP 1: Y89.14/20 Low 27 Jan, Top of the Ichimoku cloud
SUP 2: Y88.95 Low 18 Dec
SUP 3: Y88.55 Base of the Ichimoku cloud
SUP 4: Y88.24 61.8% retracement of the 26 Nov rally

CABLE
Opened Asia around $1.6175 and initially edged up to $1.6180 before dropping back to retest NY pullback lows at $1.6137 as rate tracked euro-dollar's severe drop as option levels were triggered. Cable posted a low at $1.6135 before snapping back, the recovery aided as the euro move allowed euro-sterling to break support at stg0.8650 (taking out the option barrier there). The cross posted a low at stg0.8632. Cable rallied back to post session highs at $1.6230, the recovery in euro-sterling back to stg0.8650 then weighing back to ease rate back to $1.6170 ahead of the European open.

Rate slowly recovered , breaking the overnight highs into early Europe to extend move to $1.6240, just short of Wednesday's highs at $1.6245. Rate retains a firm tone around $1.6235, the cross currently around stg0.8638. Cable offers seen placed between $1.6240/50, a break to open a move toward $1.6270/80 with stops above. Talk that Tullow Oil raising of stg1bln Wednesday to be converted to dollars to fund African expansion which could counter ongoing UK oil company dividend demand interest.

RES 4: $1.6459/79 High 19 Dec 61.8% retracement of the 16 Nov decline
RES 3: $1.6415 Current top of the daily Bollinger band
RES 2: $1.6295 100, 55-day moving average
RES 1: $1.6215 200-day moving average

CURRENT LEVEL: $1.6184

SUP 1: $1.6077 Low 22 Jan
SUP 2: $1.6061 Support line from 30 Dec
SUP 3: $1.6030 76.4% retracement of the $1.5898/1.6459 rally
SUP 4: $1.5898/30 Low 7 Jan, Current base of daily Bollinger band

MORNING FX
BRIEFING
German name sales of cross yen ahead of the Sydney open triggered exposed stops, left vulnerable in the thin markets, with euro-yen dropping 50 points to an early low of Y126.69 and dragging dollar-yen down to Y89.71. The move met fund demand at the lows which snapped euro-yen back to Y127.95, dollar-yen to Y90.41 before the rates settled back to Y127.80 and Y90.25. Euro-dollar got a mild bid tone at the start of the main session, thanks to the euro-yen recovery. The pair managed a $1.4173 high and then spent the rest of the morning shuffling between there and $1.4133. Rate currently trades around $1.4155.

After the active start market overall in Asia was described as subdued. Exporter demand for Aussie provided buoyancy, offsetting any negative react from the release of weaker than expected Australian PPI data, with Asian sovereign buys also cited as the rate lifted from lows of $0.8995 to $0.9075 before Japanese sales of Aussie-yen countered. Focus today is on developments over Bernanke's re-appointment, with US existing home sales the stand out data release.

EURO
Euro-dollar opened Asia around $1.4150, slightly firmer than the NY close as traders adjusted the rate on the weekend reports that Bernanke would secure enough Senate votes to be reappointed. Rate came under pressure in early pre Sydney trade as a German name took advantage of the thin conditions to target downside stops in euro-yen, forcing this rate down 50 points to Y126.69, the move taking euro-dollar to early lows of $1.4112.

Recovery was seen more aggressive as funds emerged into normal hours trading, euro-yen spiking back up to Y127.95, with euro-dollar tracking the move as it rallied to $1.4173. Rate then settled into a $1.4150/70 range for the balance of the session, currently trading around $1.4163. Offers seen placed between $1.4175/85,with talk of stops positioned on a break of $1.4190. Further offers noted toward $1.4220 with more stops above. Support seen at $1.4155/50, more between $1.4135/25 ahead of the mentioned Asian low at $1.4112.

RES 5: $1.4447 Low 14 Jan
RES 4: $1.4355 21-day moving average
RES 3: $1.4315 200-Day moving average
RES 2: $1.4218 Low 22 Dec
RES 1: $1.4170 5-day moving average

CURRENT LEVEL: $1.4162

SUP 1: $1.4090 Current base of the daily Bollinger band
SUP 2: $1.4009/29 Low 29 Jul, 50% retrace of April/Dec rally, Low 21 Jan
SUP 3: $1.3937 Minor support line 3 Nov
SUP 4: $1.3801/25 50% retracement of March/Dec rally, Low 22 June
SUP 5: $1.3736/50 50% post-Oct 2008, 61.8% April/Dec rally, Low 16 June

YEN
German name selling of yen crosses greeted the thin pre Sydney market Monday, euro-yen dropping 50 points to Y126.69, the move dragging dollar-yen to session lows of Y89.71. Fund demand emerged into the dips with the correction off the lows snapping euro-yen through reported CTA stops at Y127.80 to take rate on to Y127.95. Dollar-yen rallied back to Y90.41 before recovery faded, with Japanese sales of Aussie-yen noted as a factor in the counter. Euro-yen currently trades around Y127.70, dollar-yen at Y90.30.

Dollar-yen offers placed toward Y90.50, with stops reported above. A break here to open a move to Y90.80 ahead of Y92.00. Support remains toward Y89.70 (Asia low Y89.71), with stronger interest seen from Y89.50 through to Y89.30. For euro-yen, offers placed toward Y128.00, more from Y128.20 through to Y128.40 with stops placed on a break of Y128.50. Support Y126.70/50.

RES 4: Y92.05 High 14 Jan
RES 3: Y91.70/87 21-day moving average, High 21 Jan
RES 2: Y91.15/35 Kijun & Tenkan lines of the Ichimoku cloud
RES 1: Y90.36 Breakout level & 100-day moving average

CURRENT LEVEL: Y90.12

SUP 1: Y89.30 50% retracement of the 26 Nov rally
SUP 2: Y88.95 Low 18 Dec
SUP 3: Y88.55 Top of the Ichimoku cloud
SUP 4: Y88.24/30 61.8% retracement, Base of the Ichimoku cloud

CABLE
02:54 01/25 CABLE: Opened Asia around $1.6100 and initially marked session lows at $1.6090 as rate tracked the early cross yen sell pressure. Rate recovered off lows, in tandem with euro-yen and euro-dollar, pushing up to $1.6137 where it met US name supply. Rate eased back to $1.6100, settling for most of the session between $1.6095/1.6125 before a late rally spiked rate up to $1.6144 ahead of the European open, the move seen as a reaction to euro-sterling as this rate dropped back from overnight highs at stg0.8796 to stg0.87665.

Cable currently trades around $1.6125, the cross around stg0.8770. Cable offers seen between $1.6145/55, a break of $1.6160 to open a move toward $1.6190/00. Support seen at $1.6090 (Asia low), stronger between $1.6075/65.

RES 4: $1.6479 61.8% retracement of the decline from 16 Nov
RES 3: $1.6435/59 Top of the daily Bollinger band, High 19 Dec
RES 2: $1.6310/20 100, 55-day moving average
RES 1: $1.6220 5-day moving average

CURRENT LEVEL: $1.6118

SUP 1: $1.6077 Low 22 Dec
SUP 2: $1.6028/30 Minor support line, 76.4% of $1.5898/1.6459 rally
SUP 3: $1.5898 Low 7 Jan
SUP 4: $1.5880 Current base of daily Bollinger band

MORNING FX
BRIEFING
The dollar saw a subdued start to the new week in Asia, with light flows seen ahead of the US holiday weekend. Dollar-yen was trading around Y91.00, modestly higher from Friday's close and near the top of the session trading range. Dealers said early demand for yen crosses lifted the pair to the high but that fizzled out when Japanese stocks sank into the red, and caused risk appetite to wilt. Euro-dollar was knocked to early lows of $1.4335 (NY low $1.4336) as market reacted to an Ambrose Evans-Pritchard article in the Telegraph suggesting the ECB has begun to look at the legal ramifications if Greece were to leave the EU.

Rate quickly recovered back to opening levels around $1.4370/75 with trading conditions reported to be thin due to this afternoon's US holiday. Traders also noted a decent Chf1.0290 offer in dollar-Swiss aiding euro-dollar support. Sterling made decent gains overnight, boosted by positive M&A (France GDF/UK International Power) and better than expected RightMove house data, with euro-sterling trading back under its 200 day m/a. Very light data calendar today and US holiday.

EURO
Euro-dollar opened Asia around $1.4370, getting an early lift to $1.4374 before coming under pressure as market reacted to an Ambrose Evans-Pritchard article in the Telegraph suggesting that the ECB had begun to look at the legal ramifications if Greece were to leave the EU. Thin conditions (US holiday) allowed light early flows to press the rate down to $1.4335 (NY low $1.4336), with buyers placed around that NY low providing support. Initial recovery to $1.4350 picked up further sell interest from momentum and CTA accounts, with added sales of euro-sterling, allowing rate to retest lows before meeting stronger demand interest.

Rate recovered through its opening levels, extending to $1.4388 in Asia, $1.4395 into early Europe ($1.4398 NY high). Rate currently trades around $1.4385. Offers remain in place toward $1.4400, a break here to open a move toward $1.4430 ahead of $1.4445/50. Support remains at $1.4335/30, more toward $1.4300. Traders highlight the 200 day m/a at $1.4288 (some have this at $1.4275) as key support, with further demand interest seen placed behind at $1.4260/50 and $1.4220.


RES 4: $1.4790 61.8% retracement of December decline
RES 3: $1.4669/81 Former bear-flag base, 100, 55-DMA, 50% of Dec decline
RES 2: $1.4572/80 38.2% retracement of Dec decline, High 13 Jan
RES 1: $1.4447/50 Low 14 Jan, 5-day moving average

CURRENT LEVEL: $1.4382

SUP 1: $1.4339 76.4% retracement of 8 Jan recovery
SUP 2: $1.4287 200-Day moving average, Support line from 22 Dec
SUP 3: $1.4218 Low 22 Dec
SUP 4: $1.4118 38.2% retracement of March/Dec rally

YEN
Early euro-yen sales were prompted as the single European currency reacted to a negative article on Greece in the Telegraph, led cross yen and dollar-yen lower in initial trade, dollar-yen touching a low of Y90.70, while euro-yen triggered stops under Friday's low at Y130.30 to touch Y130.10. Weak Asian equities also added to the early negative tone. As equity markets steadied so euro-yen recovered. moving back up in tandem with euro-dollar to Y130.94 before meeting decent sell interest placed ahead of Y131.00. Rate dropped back to Y130.50 before picking up fresh demand interest into early Europe to edge it back toward the recent highs.

Dollar-yen recovered to Y91.07, holding around Y91.00 into early Europe. Euro-yen offers remain around Y131.00, a break above to open a move toward Y131.25/35 ahead of Y131.70/80. Support Y130.10/00, stops through Y129.90. Dollar-yen offers Y91.10/20, more between Y91.35/55. Support Y90.70/50 ahead of Y90.35/15. Equities continue to be seen as the main driver with attention also on JAL's expected bankruptcy and DPJ political concerns.


RES 4: Y94.22 50% projection of 26Nov/4Dec rally from 5 Jan
RES 3: Y93.78 High 7 Jan
RES 2: Y93.20 200-day moving average
RES 1: Y91.90/20 21-day moving average, Tenkan line of Ichimoku cloud

CURRENT LEVEL: Y90.85

SUP 1: Y90.60 Low 15 Jan
SUP 2: Y90.36 38.2% retracement, 100-DMA
SUP 3: Y90.00 55-day moving average
SUP 4: Y89.30 50% retracement of the 'December' rally

CABLE
Opened Asia around $1.6270 and eased to session lows of $1.6235 as rate tracked early pressured sales of euro-dollar. Cable recovered as euro-sterling broke under its 200 day m/a at stg0.8845, strong sales of the cross taking this rate down to stg0.8803 in Asia and allowing cable to rally to $1.6320. The cross rallied back to stg0.8830, as cable dropped back to $1.6275/70, but sterling again picked up fresh demand to take cable back to retest $1.6320 in early Europe (extending highs to $1.6335), while the cross sat back heavily on stg0.8800.

Sterling demand overnight seen from system accounts, with further sterling positive M&A flows (France GDF Suez making a stg5bln approach for UK International Power) also prompted. UK RightMove release of stronger than expected housing data also aided the pound's buoyancy overnight. Cable offers reported in place at $1.6345 (Europe high Friday), with further interest noted close behind between $1.6355/65. Support seen at $1.6300 ahead of $1.6280. Euro-sterling demand remains ahead of stg0.8800, with stops reported on a break below.


RES 4: $1.6479 61.8% retracement of the decline from 16 Nov
RES 3: $1.6410 High 16 Dec
RES 2: $1.6398 61.8% retracement of December decline
RES 1: $1.6356/81 Fibonacci levels, 55-day moving average

CURRENT LEVEL: $1.6314

SUP 1: $1.6211 Low 15 Jan
SUP 2: $1.6193 Highs 11 & 12 Jan
SUP 3: $1.6085 21-day moving average
SUP 4: $1.5896 Low 7 Jan

MORNING FX
BRIEFING
The dollar marked scant gains against the yen Weds. Dollar-yen fell to a 3-week low of Y90.73 in the U.S. session but started this morning with a slight uptick, trading around Y91.00 as the Asia-Pacific session got under way. The pair then marked a high of Y91.36 as the dollar's rebound continued and as risk appetite continued to worsen, with reaction to hawkish Fed comments from Plosser and Fisher aiding.

But the gains didn't last as yen crosses resumed their declines, with euro-yen briefly hitting a Y132.25 high before quickly withdrawing to Y131.51. Late on, dollar-yen was back down at where it had started the day, around Y91.00/05 while euro-yen was also near its opening levels, around Y131.80. Euro-dollar also failed to extend an initial rise as concerns about Greece's debt repayment problems continued to dog the eurozone currency. The pair pulled back from a high just shy of $1.4500 to hit $1.4456 in midmorning trade, despite the dollar's decline. The recovered to trade around $1.4485. Meanwhile, sterling was buoyed by comments from the Bank of England's Sentance as well as positive M&A flows.

EURO
Euro-dollar opened Asia around $1.4490 and began to ease as euro-yen was pressured lower after the Tokyo fix. Dollar demand was also given an added early boost as markets reacted to hawkish comments from Fed's Plosser and Fisher. Rate pressed down before meeting decent demand that restricted losses to $1.4456. Rate then recovered, with traders noting Asian sovereign demand interest in the move (two waves mentioned) with rate edging back to challenge the $1.4500 area into early Europe. Continued demand into this session took rate on to $1.4516, currently trading around $1.4507.

Rate continues to be seen within a basic $1.4450/1.4550 range with stops said to have been built on a break out on the bottom side, though fresh demand reported to begin from around $1.4440. Greek concerns continue as a counter to upside hopes with rate seen contained by two way cross flows. Resistance noted at $1.4530 ahead of $1.4545/60, with stops noted on a break of $1.4570.


RES 4: $1.4790/10 61.8% retracement and November lows
RES 3: $1.4695 55-day moving average
RES 2: $1.4669/81 Former bear-flag base, 100-DMA, 50% of Dec decline
RES 1: $1.4572 38.2% retracement of Dec decline

CURRENT LEVEL: $1.4488

SUP 1: $1.4450 5-day moving average
SUP 2: $1.4375 21-day moving average
SUP 3: $1.4270/76 200-Day moving average, Support line from 22 Dec
SUP 4: $1.4218 Low 22 Dec

YEN
Dollar-yen lifted off early lows of Y91.09 to Y91.36 as the dollar got an early lift on market reaction to reported hawkish comments from Fed Fisher and Plosser. However, move met willing sellers into the rally, with Asian equity markets trading soft as they took direction from the Shanghai reaction to yesterday's PBOC hike of 0.50% in reserve requirements. Euro-yen tracked the early move, finding demand interest as Japanese traders were attracted in by the lower levels presented after Tuesday's sell off ahead of the fix, the rate edging to a high of Y132.25 from Y131.94 opening level, before it too met sell interest that eased it lower again.

Dollar-yen eased to a session low of Y90.91 (NY low Y90.73) while euro-yen traded off to Y131.51. Dollar-yen again met willing buyers into the dip below Y92.00 with rate able to recover to Y91.25 into early Europe. Euro-yen currently trades around Y132.22, lifted by dollar-yen's recovery as well as euro-dollar extending its recovery back above $1.4500. Dollar-yen bids seen from Y90.90 to Y90.70 with stops below. Resistance toward Y91.80.


RES 4: Y94.22/27 50% proj 26Nov/4Dec rally from 5 Jan, Res line 4 Dec
RES 3: Y93.35/78 200-day moving average, High 7 Jan
RES 2: Y92.30 Tenkan line of the Ichimoku cloud
RES 1: Y91.75/00 21, 5-day moving average

CURRENT LEVEL: Y91.07

SUP 1: Y90.75 Low 12 Jan, High 4 Dec
SUP 2: Y90.36/45 38.2% retracement, 100-DMA and Kijun line &
SUP 3: Y90.00 55-day moving average
SUP 4: Y89.30 50% retracement of the 'December' rally

CABLE
Cable opened into Asian trade at $1.6160 before initially marking early highs at $1.6167 before easing back to $1.6137 on early dollar demand, seen as market reacted to hawkish comments from Fed Plosser and Fisher. Rate bounced again between $1.6167/37 before picking up a fresh bid tone as sterling's recent positive trend moved back into gear. Rate moved back up to retest Tuesday's highs at $1.6195, breaking above ahead of the European open and extending rally into early Europe to $1.6225.

Lot of talk around of euro-sterling LHS (sell) interest to be seen into the 0900GMT fix which has also aided the pounds positive feel. Demand for sterling seen M&A related (possible Vattenfall), with BOE MPC Sentance headline comments (highlighting hawkish element though disregarding dovish counter argument) also providing bullish tone. Key resistance seen between $1.6235/42, with stops noted on a break of $1.6250. A break and clear here to boost technical positive outlook. Support seen back at $1.6205/00 ahead of $1.6180.


RES 4: $1.6365/10 55-day moving average, High 16 Dec
RES 3: $1.6310 100-day moving average
RES 2: $1.6237/42 High 31 Dec, 4 Jan, Bollinger band top
RES 1: $1.6194 Highs 11, 12 Jan

CURRENT LEVEL: $1.6180

SUP 1: $1.6065/90 21, 5-day moving average
SUP 2: $1.5880/96 Current base of daily Bollinger band, Low 7 Jan
SUP 3: $1.5833 Low 30 Dec
SUP 4: $1.5707 Low 13 October