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Saturday, April 28, 2007
GBP/USD: Retraces 50% of Chaotic Intraday Range
GBP/USD sits near its lows for the North American session, changing hands around 1.9957 with dealers struggling to offload stale longs taken earlier in the session amid talk of huge dividend-related demand for the pound. Stops above the recent highs in the 2.0060/65 area were firmly in sight until the rug was pulled out from under the market by a variety of rumors and flows near the London fixing. Some say once the dividend-related bid was pulled, the bottom dropped out of cable. 1.9950 is 50% of the 1.9865/2.0045 rally from the London lows to the New York highs. Further support lies at 1.9935; 61.8% of the same rally.
USD/JPY: Firming US Bond Yields Providing Support
U.S. bond yields rallied this morning on the US data still reflecting underlying inflation pressures but came off the highs on rumored Asian buying of treasuries. The rise in yields has resumed however with US ten-year bond yields at 4.70% and within striking distance of the highs of 4.705% this morning. This, along with USD/JPY buying from US investment houses earlier, is keeping USD/JPY bid near session highs of 119.77.
The poor data in Japan last night has underpinned expectations that Japanese rates will be low, despite comments from Fukui that appeared to discard the CPI-based interest rate model, suggesting that rates can even be raised if the CPI falls on the year. Still, a move before August is not seen likely, and this is encouraging JPY weakness. A wide variety of dealers still report strong selling interest ahead of 120.00 including numerous corporate and exporter offers ahead of that level.
The poor data in Japan last night has underpinned expectations that Japanese rates will be low, despite comments from Fukui that appeared to discard the CPI-based interest rate model, suggesting that rates can even be raised if the CPI falls on the year. Still, a move before August is not seen likely, and this is encouraging JPY weakness. A wide variety of dealers still report strong selling interest ahead of 120.00 including numerous corporate and exporter offers ahead of that level.
USD/CHF: Greenback Begrudgingly Breaks 1.21 Then Rolls Back
The market has liquidated large amounts of short USD positions over the course of the morning, rumoured to be as much as 20 yards if you add up the cable dividend rumours, the wobbly US hedge fund rumour, and the "other" large British clearer rumour. Add to that talk of one of the major banks shutting down quotes on some major currency pairs on its electronic portal, and you have to assume that a good amount of dollars have already been purchased, even if the cumulative above is an overstatement (or not).
In such an environment one would have expected USD/CHF to have been able to hurdle 1.2100 and pressure topside stops, the former it did, the latter not. 1.2105 was the top, a smidgeon over yesterday's highs, and if USD/CHF cannot run topside on a day like this you have to question when it can, or examine the reasons why it didn"t. EUR/CHF pressured its all time high, hitting 1.6465 at the peak, and is still trading above 1.6460; GBP/CHF rallied back to 2.4165, up 80pts on the day, before sliding back to 2.4145; CAD/CHF hit new 5-mth highs at 1.0837, and CHF/JPY has slid back to 99.00 from 99.24. Net on net a weak Swissy on the crosses, so lack of dollar strength is not due to lifting of cross trades.
So what can it be? Well objectively the bulk of the "dollar" positions kicking around are in EUR/USD and other majors (like cable), there just isn"t much point running short USD/CHF at negative carry unless you have to. Secondly, a brand new EUR/USD highs today, and before the dollar bears give up on the trend they will want to give it some breathing room. All eyes are on next week, and how EUR/USD behaves, if the fund manager calling for a top over this week is right, it could become very interesting.
In such an environment one would have expected USD/CHF to have been able to hurdle 1.2100 and pressure topside stops, the former it did, the latter not. 1.2105 was the top, a smidgeon over yesterday's highs, and if USD/CHF cannot run topside on a day like this you have to question when it can, or examine the reasons why it didn"t. EUR/CHF pressured its all time high, hitting 1.6465 at the peak, and is still trading above 1.6460; GBP/CHF rallied back to 2.4165, up 80pts on the day, before sliding back to 2.4145; CAD/CHF hit new 5-mth highs at 1.0837, and CHF/JPY has slid back to 99.00 from 99.24. Net on net a weak Swissy on the crosses, so lack of dollar strength is not due to lifting of cross trades.
So what can it be? Well objectively the bulk of the "dollar" positions kicking around are in EUR/USD and other majors (like cable), there just isn"t much point running short USD/CHF at negative carry unless you have to. Secondly, a brand new EUR/USD highs today, and before the dollar bears give up on the trend they will want to give it some breathing room. All eyes are on next week, and how EUR/USD behaves, if the fund manager calling for a top over this week is right, it could become very interesting.
Swiss Outlook (27th April 2007)
Into North American trading and the Dollar is back under the cosh as the weight of expectation for the Q1 GDP release causes a fresh waves of selling. Advanced US Q1 GDP is set for release at 12:30 GMT. The Commerce Dept. releases its first estimate and economists expect a +1.8% annualized rate of growth. USD/CHF has been forced back to 1.2040 intraday but bids into the 1.2030 mark are eyed by bears should the US unit remain under pressure. Following the early data, the attention will turn to the 14:00 GMT unveiling of April final Michigan Sentiment. A median reading of 85.2, compared with the 88.4 previous, is forecast.
Local dealers cite the hawkish Roth comments and the solid KoF headline as a reason to sell USD/CHF into strength. The Leading Indicator may not have matched the markets 2.00 expectations but the results remain robust and when combined with the Roth rhetoric, on the need for higher Swiss rates, we would agree that further Swiss Franc strength looks sustainable in the medium-term with 1.1995/2000 targets also persisting.
Local dealers cite the hawkish Roth comments and the solid KoF headline as a reason to sell USD/CHF into strength. The Leading Indicator may not have matched the markets 2.00 expectations but the results remain robust and when combined with the Roth rhetoric, on the need for higher Swiss rates, we would agree that further Swiss Franc strength looks sustainable in the medium-term with 1.1995/2000 targets also persisting.
Sterling Outlook (27th April 2007)
Tripped buy stops above 1.9950 helped cable push its recovery envelope from an early Europe 11-day low of 1.9866 to a late London morning high of 1.9963. Resistance levels above include 1.9980 (yesterday's NY session peak), 2.0000, 2.0014 (Thursday's Asian session base) and 2.0062 (double-day high, yesterday & Wednesday). A 2.0000 option strike rolls off at today's 14:00GMT NY cut. Option barriers are tipped at 2.0150+.
1.9923 (today's Asian session peak) is now a support point. Lower props include 1.9892 (yesterday's low) and 1.9866.
News-wise: Tony Blair is considering announcing his resignation as Labour leader before next Thursday's local elections, according to the Daily Telegraph. The SNP is on course to become the single largest party in the Scottish Parliament, according to a YouGov poll for the Telegraph. The SNP's manifesto promises a referendum on independence for Scotland.
Today's key event risk is the 12:30GMT advance estimate of US Q1 GDP. Forecast: +1.8% y/y, from +2.5% y/y in Q4.
1.9923 (today's Asian session peak) is now a support point. Lower props include 1.9892 (yesterday's low) and 1.9866.
News-wise: Tony Blair is considering announcing his resignation as Labour leader before next Thursday's local elections, according to the Daily Telegraph. The SNP is on course to become the single largest party in the Scottish Parliament, according to a YouGov poll for the Telegraph. The SNP's manifesto promises a referendum on independence for Scotland.
Today's key event risk is the 12:30GMT advance estimate of US Q1 GDP. Forecast: +1.8% y/y, from +2.5% y/y in Q4.
Yen Outlook (27th April 2007)
The USD has struggled to better the Asian highs of 119.75 and is now trading roughly in the middle of its 119.30-119.75 range. Price action is now stuck at levels close to the opening point as the market loses direction and ideas. The BOJ left policy unchanged with its overnight target rate set at 0.5% as expected but a larger than expected fall in consumer prices and industrial production caught the near-term market hawks wrong footed.
Some order was returned by a set of fairly hawkish remarks from BOJ governor, Fukui. The BOJ would need to hike rates as long as long-term economic and price trends are strong, he said. USD/JPY still has a 120.00 look about it but the market needs to get today's U.S GDP data out of the way before fresh direction is seen. There is a feeling in the market that unless the recent 119.85-88 highs are bettered today the risk is for a Yen fight back next week. The 120.00 option barriers look safe.
Some order was returned by a set of fairly hawkish remarks from BOJ governor, Fukui. The BOJ would need to hike rates as long as long-term economic and price trends are strong, he said. USD/JPY still has a 120.00 look about it but the market needs to get today's U.S GDP data out of the way before fresh direction is seen. There is a feeling in the market that unless the recent 119.85-88 highs are bettered today the risk is for a Yen fight back next week. The 120.00 option barriers look safe.
Euro Outlook (27th April 2007)
Into North American trading and EUR/USD once again has the all-time high in its sights. Spot has bounced off 1.3585 support intraday and sellers into the 1.3640's are currently attempting to cap the move higher. However, further stabs higher are looked for and 1.3667 remains targeted.
Before the bounce dealers noted that disappointing US data this week had failed to see the US unit incur serious losses. However, with a break into the 1.3650's now looming the view is now that negative momentum may be building and the Dollar could be in for a tough time going forward if more bad news is sitting in the pipeline. Advanced US Q1 GDP is set for release at 12:30 GMT and this will be key to further rallies and bulls targeting the 1.3700 options.
The Commerce Dept. releases its first estimate and economists expect a +1.8% annualized rate of growth. Following this the attention will turn to the 14:00 GMT unveiling of April final Michigan Sentiment. A median reading of 85.2, compared with the 88.4 previous, is forecast.
Before the bounce dealers noted that disappointing US data this week had failed to see the US unit incur serious losses. However, with a break into the 1.3650's now looming the view is now that negative momentum may be building and the Dollar could be in for a tough time going forward if more bad news is sitting in the pipeline. Advanced US Q1 GDP is set for release at 12:30 GMT and this will be key to further rallies and bulls targeting the 1.3700 options.
The Commerce Dept. releases its first estimate and economists expect a +1.8% annualized rate of growth. Following this the attention will turn to the 14:00 GMT unveiling of April final Michigan Sentiment. A median reading of 85.2, compared with the 88.4 previous, is forecast.
Friday, April 27, 2007
GBP/USD: Edging Up toward 1.9925 Offers
GBP/USD is trying to bottom just below 1.9900 but so far is having trouble clearing 1.9925 offers on rebounds. More sellers lie toward 1.9950 as profit-taking on stale Sterling long remains one of the main themes for the market today. Reports of Japanese real-money interest in GBP/JPY are helping give the cross a modest bid this afternoon, in-line with the other JPY crosses. GBP/USD trades at 1.9923 while GBP/JPY trades at 238.23.
USD/JPY: Japan Household Spending Expected to Ease - Preview
Overall household spending is expected to ease back 0.5% in March after rising 1.4% in January and a further 0.2% in February, though this would still see it up 0.9% from a year ago, the third straight positive print. Spending by workers' households is expected stronger after a very poor result in February: IFR looks for a 2.0% rise after spending slumped 4.6% in February, the largest monthly decline since March 2004.
Against a year earlier, it is expected 1.4% higher, improving from a 2.7% fall in February. In trend terms, spending is rising gradually, though stronger gains in income have yet to translate into much of an acceleration in spending. Employment growth remains uncertain, jobs are expected to rise just 0.5% from a year ago in March, though recent gains in male employment should underpin firmer workers' household spending in coming months.
Against a year earlier, it is expected 1.4% higher, improving from a 2.7% fall in February. In trend terms, spending is rising gradually, though stronger gains in income have yet to translate into much of an acceleration in spending. Employment growth remains uncertain, jobs are expected to rise just 0.5% from a year ago in March, though recent gains in male employment should underpin firmer workers' household spending in coming months.
EUR/USD: Crosses, French Data Help Boost in Range
EUR/USD is a shade higher in quiet afternoon trade, underpinned by another drop in French unemployment to 8.3% in March and on comments from the Fed's Fisher that the US economy should avoid recession and that subprime problems do not appear systemic. EUR/JPY is the main mover this afternoon, helping underpin EUR/USD while sustained EUR/GBP strength is helping as well. Offers are seen between 1.3610 and 20 in EUR/USD with more above 1.3650 toward 1.3667 record highs. EUR/USD trades at 1.3607.
USD/JPY: Stops Triggered Above 119.60
USD/JPY has rallied through stops at 119.60 to 119.67 highs with more stops but also offers seen mixed in on a move to 120.00. Dealers say that Fed Fisher's comments that he does not see a systemic risk from subprime was one factor helping the USD. The move up took EUR/JPY to fresh highs of 162.80 with offers still staggered up to 163.00 but with stops reported above this level. For USD/JPY, the options remain at 119.75 & 120.00 with stops above 120.00.
USD/CHF: 1.21 Un-scalable So Far, Buck Tests Support on Hourly
With spot USD/CHF confined to a 1.2069/99 range in New York, and the greenback's inability to pop the figure, day traders are reverting to old habits and selling rallies. Whispers that the dollar may be approaching a short term cycle bottom have been filtering into the market, prompting some of the more vulnerable shorts to scale back, however the veteran bears are warm and fuzzy, still in their winter coats, and unless the buck can break 1.2155, they won't even break a sweat.
On the hourly study the dollar looks tired, fast and slow stochastics about to enter negative crosses, support on the hourly chart at 1.2075 being tested, and RSI has stalled at a paltry 67. It is interesting that on the daily study the fast and slow stochastics have crossed positively, with the fast stochastic recommending a buy at yesterday's close (1.2047) and the slow stochastics in the course of crossing today, and so suggesting a buy on close unless something drastic happens between now and then.
The real bears have been in control of the market since last October when the dollar peaked at 1.2775 and are short anywhere between there and 1.2550 (the February highs) and no amount of sabre rattling will dislodge them until USD/CHF break above 1.2285, short term resistance on daily and weekly studies, with 1.2360 looking to be the key. A turn may be in the offing, but it will be a hard slog for USD/CHF with so many willing bears prowling the slopes.
On the hourly study the dollar looks tired, fast and slow stochastics about to enter negative crosses, support on the hourly chart at 1.2075 being tested, and RSI has stalled at a paltry 67. It is interesting that on the daily study the fast and slow stochastics have crossed positively, with the fast stochastic recommending a buy at yesterday's close (1.2047) and the slow stochastics in the course of crossing today, and so suggesting a buy on close unless something drastic happens between now and then.
The real bears have been in control of the market since last October when the dollar peaked at 1.2775 and are short anywhere between there and 1.2550 (the February highs) and no amount of sabre rattling will dislodge them until USD/CHF break above 1.2285, short term resistance on daily and weekly studies, with 1.2360 looking to be the key. A turn may be in the offing, but it will be a hard slog for USD/CHF with so many willing bears prowling the slopes.
USD/JPY: Inflation Seen in the Red in Japan - Preview
All main measures of inflation in Tokyo in April and all of Japan in March are expected to be in the red: headline and core (excluding fresh food) prices in Tokyo are seen down 0.1% from a year earlier despite a 0.2% gain over the month. For all of Japan, core and headline prices should rise 0.3% over the month, though this would still leave core prices down 0.2%, their biggest fall in fifteen months, and headline prices down 0.1%, improving from the 0.2% decline in February.
The data is unlikely to accord with that of Bank of Japan Governor Fukui, who said last Thursday that core CPI is likely to follow a positive trend. If it does, that will likely reflect the impact of the renewed rise in oil prices and the weak yen more than anything else; domestic demand remains weak and there seems little upward momentum in prices from domestic factors.
Excluding energy prices, as most countries' core indices do, consumer prices have been even weaker, those for Tokyo fell 0.3% from a year ago in March, while those for Japan fell by the same amount in February. Fukui clearly is trying to justify the last rate hike in February but unfortunately the data are not in accordance with either his views or policies.
The data is unlikely to accord with that of Bank of Japan Governor Fukui, who said last Thursday that core CPI is likely to follow a positive trend. If it does, that will likely reflect the impact of the renewed rise in oil prices and the weak yen more than anything else; domestic demand remains weak and there seems little upward momentum in prices from domestic factors.
Excluding energy prices, as most countries' core indices do, consumer prices have been even weaker, those for Tokyo fell 0.3% from a year ago in March, while those for Japan fell by the same amount in February. Fukui clearly is trying to justify the last rate hike in February but unfortunately the data are not in accordance with either his views or policies.
Swiss Outlook (26th April 2007)
The mixture of profit-taking and broader Dollar buying kept USD/CHF working higher but the 1.21's continue to be eyed. EUR/CHF has been capped into the 1.6440's but fresh all-time highs are eyed on further strength. Looking ahead, the Friday release of US Q1 07 GDP data may be eyed in the longer-term but intraday there is little in the way of key economic unveilings to keep the US unit under pressure.
Weekly jobless data represents the early focus before the 14:00 GMT March Help-Wanted reading. Economists expect a 31 number, unchanged from the February headline. Following this, regional Fed data is set to dominate with the April Kansas survey due at 15:00 GMT and Chicago March Manf. data at 16:00 GMT. Following this a host of Fed officials are set to speak but only further clues over the path for US rates will impact the Dollar.
Domestic dealers look to the Friday release of the KoF Leading Indicator for April. A 2.00 reading still looks a likely outcome, against the previous 1.90 headline, should another robust Swiss barometer be seen. Any such reading could spur more 50bp SNB speculation and as a result keep the Franc supported.
Weekly jobless data represents the early focus before the 14:00 GMT March Help-Wanted reading. Economists expect a 31 number, unchanged from the February headline. Following this, regional Fed data is set to dominate with the April Kansas survey due at 15:00 GMT and Chicago March Manf. data at 16:00 GMT. Following this a host of Fed officials are set to speak but only further clues over the path for US rates will impact the Dollar.
Domestic dealers look to the Friday release of the KoF Leading Indicator for April. A 2.00 reading still looks a likely outcome, against the previous 1.90 headline, should another robust Swiss barometer be seen. Any such reading could spur more 50bp SNB speculation and as a result keep the Franc supported.
Sterling Outlook (26th April 2007)
Across-the-board USD demand depressed cable to 1.9960 bids late in the London morning. Further GBP/USD bids are tipped into 1.9950, a level at which an exotic option barrier reportedly resides. A 1.9950 option strike rolls off at today's 14:00GMT NY cut. Sell stops are tipped sub-1.9950.
1.9988 (Tuesday's NY session low) is now a rebound resistance level. Upper obstacles include 2.0005 (yesterday's low), 2.0014 (today's Asian session base) and 2.0062 (yesterday's peak). 2.0062 was revisited in early European trade, following the 06:00GMT disclosure of stronger-than-expected UK house price data.
According to the Nationwide: UK house prices have risen by another 0.9% this Month, a 0.6% rise was forecast, and stand 10.2% higher on an annualized basis. Option-related sell interest reportedly helped prevent GBP/USD vaulting 2.0062.
There is speculation that a UK clearer may have to buy GBP in good size on or by Monday (Apr 30), re: a slated dividend payment. US weekly jobless claims will be disclosed at 12:30GMT. Forecast: 330k. BoE MPC member Tucker speaks at 14:05GMT.
1.9988 (Tuesday's NY session low) is now a rebound resistance level. Upper obstacles include 2.0005 (yesterday's low), 2.0014 (today's Asian session base) and 2.0062 (yesterday's peak). 2.0062 was revisited in early European trade, following the 06:00GMT disclosure of stronger-than-expected UK house price data.
According to the Nationwide: UK house prices have risen by another 0.9% this Month, a 0.6% rise was forecast, and stand 10.2% higher on an annualized basis. Option-related sell interest reportedly helped prevent GBP/USD vaulting 2.0062.
There is speculation that a UK clearer may have to buy GBP in good size on or by Monday (Apr 30), re: a slated dividend payment. US weekly jobless claims will be disclosed at 12:30GMT. Forecast: 330k. BoE MPC member Tucker speaks at 14:05GMT.
Yen Outlook (26th April 2007)
JPY was under pressure throughout the European morning. Demand relating to month end settlement and investment trust launches left JPY under persistent pressure. USD/JPY cleared large 119.00 offers, barriers at 119.20 and stops above 119.25 to record a 119.29 high. EUR/JPY was able to post a strong rally from the 161.00 area to record a fresh all time high of 162.55 before falling away amid good size EUR/USD selling.
Some of the USD/JPY gains came late on in the European morning amid broad based stop loss buying of USD. This leaned on EUR/USD and helped USD/JPY into the upper end of the broad trading range. EUR/JPY was left mid range around 162.30 ahead of the US open. Interest is expected to dissipate ahead of the Golden Week holidays, although tomorrow's key Japanese data and the semi-annual report from the BOJ could add to the JPY's woes.
Inflation is expected to be well contained and the central bank should continue to highlight a gradual approach to rate tightening. This should pave the way for a fresh run on 120.00 and extended EUR/JPY gains.
Some of the USD/JPY gains came late on in the European morning amid broad based stop loss buying of USD. This leaned on EUR/USD and helped USD/JPY into the upper end of the broad trading range. EUR/JPY was left mid range around 162.30 ahead of the US open. Interest is expected to dissipate ahead of the Golden Week holidays, although tomorrow's key Japanese data and the semi-annual report from the BOJ could add to the JPY's woes.
Inflation is expected to be well contained and the central bank should continue to highlight a gradual approach to rate tightening. This should pave the way for a fresh run on 120.00 and extended EUR/JPY gains.
Euro Outlook (26th April 2007)
The failure to eclipse the all-time highs yesterday left the topside fortified ahead of the 1.3670 and 1.3675 exotics. Asian trading made a late stab higher but early European action saw spot reject the levels above 1.3650. Bids into 1.3630/35 stalled the move lower for a period but the pair soon filled these and spot slipped back to 1.3600/05 support.
Official and quasi-official buyers have been noted into the lows to help kick the price slightly higher so the sub-1.36 stops remain intact for now. Looking ahead, the Friday release of US Q1 07 GDP data may be eyed but intraday there is little in the way of key economic unveilings to keep the US unit under pressure. Weekly jobless data represents the early focus before the 14:00 GMT March Help-Wanted reading.
Economists expect a 31 number, unchanged from the February headline. Following this, regional Fed data is set to dominate with the April Kansas survey due at 15:00 GMT and Chicago March Manf. data at 16:00 GMT. Following this a host of Fed officials are set to speak but only further clues over the path for US rates will impact the Dollar.
Official and quasi-official buyers have been noted into the lows to help kick the price slightly higher so the sub-1.36 stops remain intact for now. Looking ahead, the Friday release of US Q1 07 GDP data may be eyed but intraday there is little in the way of key economic unveilings to keep the US unit under pressure. Weekly jobless data represents the early focus before the 14:00 GMT March Help-Wanted reading.
Economists expect a 31 number, unchanged from the February headline. Following this, regional Fed data is set to dominate with the April Kansas survey due at 15:00 GMT and Chicago March Manf. data at 16:00 GMT. Following this a host of Fed officials are set to speak but only further clues over the path for US rates will impact the Dollar.
Wednesday, April 25, 2007
USD/JPY: Seen Heavy After Morning Retreat
On balance, USD/JPY remains in the recent range around 118.20-119.00/10, dropping back to 118.45/50 on the soft US housing data. However, dealers note that the USD/JPY feels heavy this afternoon, with the stall in JPY cross gains this morning weighing on USD/JPY. EUR/JPY has been unable to break above 162.00 and trades at 161.78 now, helping to weigh on USD/JPY.
Smallish intraday stops are eyed under 118.40 this morning but buyers remain at 118.20/25 on a push lower. Traders report some small interest in short-dated USD puts this morning and this is helping to weigh on USD/JPY as well. Data overnight was certainly supportive for the JPY with the March trade surplus rising to a record high of Y1.633 tln, up 73.9% on the year.
The surplus for the US was up to Y9,096 bln, the second largest ever largely due to auto exports which should get U.S. congressional representatives focusing on the weak JPY again. China has now become Japan's largest trading partner, surpassing the US for the first time since WW II.
Smallish intraday stops are eyed under 118.40 this morning but buyers remain at 118.20/25 on a push lower. Traders report some small interest in short-dated USD puts this morning and this is helping to weigh on USD/JPY as well. Data overnight was certainly supportive for the JPY with the March trade surplus rising to a record high of Y1.633 tln, up 73.9% on the year.
The surplus for the US was up to Y9,096 bln, the second largest ever largely due to auto exports which should get U.S. congressional representatives focusing on the weak JPY again. China has now become Japan's largest trading partner, surpassing the US for the first time since WW II.
GBP/USD: Trying to Reignite Rally
After a week of consolidation, GBP/USD is trying to reignite its rally. M&A concerns are helping keep dealers from jumping into GBP longs with both feet as RBS joins the fray with a largely cash bid for ABN (along with partners Fortis and Santander).
A pharma deal is working its way through the market a well, helping keep the topside contained. Offers are scattered from 2.0060 to 2.0150 but small stops are eyed near 2.0070 near-term, dealers note. Bids are eyed at 2.0035 and 2.0005 near-term. Cable trades now at 2.0048.
A pharma deal is working its way through the market a well, helping keep the topside contained. Offers are scattered from 2.0060 to 2.0150 but small stops are eyed near 2.0070 near-term, dealers note. Bids are eyed at 2.0035 and 2.0005 near-term. Cable trades now at 2.0048.
EUR/USD: Mersch says Rate Hikes Not Over
Any lingering fears of ECB concern over the EUR should be all but dispelled as the ECB's Mersch says that "the policy normalization process" is not over. Rates remain accommodative and moderate, he says while saying it would not be a surprise if Eurozone GDP forecasts were revised upwards.
With EUR/USD having tested all-time highs today, the ECB is showing no signs of stain so rate hikes are full steam ahead. Barriers remain at 1.3670/75 with stops at 1.3675/80, more barriers are seen at 1.3700. EUR/USD trades at 1.3657.
With EUR/USD having tested all-time highs today, the ECB is showing no signs of stain so rate hikes are full steam ahead. Barriers remain at 1.3670/75 with stops at 1.3675/80, more barriers are seen at 1.3700. EUR/USD trades at 1.3657.
US TECHS: Dollar Index Moves Towards Weekly/Monthly Supports
The latest drop in the dollar index is zeroing in on converging weekly trendlines in the 81.05-20 band which overlap monthly envelope supports in the 81.15 area. Weekly momentum studies do show a bit of bullish divergence in the sense that current readings are not much below those seen last December despite the greenback being much lower.
This means that the downside force currently in place is not quite as strong as might appear to be the case from an examination of the chart alone. That definitely does not mean we are endorsing purchasing the dollar at these levels, but think it is important to point out that some slowing of pressures could be developing as floors from late 2004 are approached. Weekly momentum has not bottomed out by any means, and any near-term bounce will attract ample selling. Daily resistance starts at 81.66-76.
This means that the downside force currently in place is not quite as strong as might appear to be the case from an examination of the chart alone. That definitely does not mean we are endorsing purchasing the dollar at these levels, but think it is important to point out that some slowing of pressures could be developing as floors from late 2004 are approached. Weekly momentum has not bottomed out by any means, and any near-term bounce will attract ample selling. Daily resistance starts at 81.66-76.
Swiss Outlook (25th April 2007)
Spot USD/CHF opened the New York market around 1.2065, plummeted quickly to 1.2008 after a series of soft US data snaps including low consumer confidence numbers, then backed back up as European leveraged accounts squared up. The post plummet peak was 1.2045, and the pair traded in an apprehensive 1.2025/40 range ahead of SNB board member Hildebrand"s speech entitled "Thoughts On The Swiss Franc Exchange Rate".
A headline that SNB Chairman Roth felt the market is "neglecting risk" was widely thought to refer to the carry trade was actually referencing equity investors, but unsettled the market nonetheless. Hildebrand asserted that the SNB would hike rates if the weak CHF fed through to inflation, however then backed off the carry trade issue, leaving traders dissatisfied, and USD/CHF to close around 1.2020.
Hildebrand's comments caused EUR/CHF to gyrate, as he referred specifically to EUR/CHF weakness early in the speech, then asserted that "There is no reason for monetary policy to react directly to the phenomenon of "carry trades". EUR/CHF fluctuated between 1.6371 and 1.6401 and closed unchanged at 1.6385.
A headline that SNB Chairman Roth felt the market is "neglecting risk" was widely thought to refer to the carry trade was actually referencing equity investors, but unsettled the market nonetheless. Hildebrand asserted that the SNB would hike rates if the weak CHF fed through to inflation, however then backed off the carry trade issue, leaving traders dissatisfied, and USD/CHF to close around 1.2020.
Hildebrand's comments caused EUR/CHF to gyrate, as he referred specifically to EUR/CHF weakness early in the speech, then asserted that "There is no reason for monetary policy to react directly to the phenomenon of "carry trades". EUR/CHF fluctuated between 1.6371 and 1.6401 and closed unchanged at 1.6385.
Sterling Outlook (25th April 2007)
2.0060 offers kept a lid on cable in early European trade, as the USD came under across-the-board selling pressure. Further offers are touted at 2.0070, with some buy stops tipped above 2.0075. The latter orders could boost the rate towards 2.0100 if located. 2.0134 (last week's 26-year top) is an above-figure resistance level. Option barriers reside at 2.0150+.
2.0021 (yesterday's London morning high) is now a support point. Lower props include 2.0000, 1.9988 and 1.9955 (yesterday's one-week floor). Middle Eastern demand was noted sub-2.0000 yesterday, following a pullback from the post-US existing home sales data high of 2.0046. An option barrier is pegged at 1.9950.
Today's key US event risk is the 14:00GMT disclosure of March new home sales. Forecast: +5.0% m/m, at 890k. US March durable goods orders will be revealed at 12:30GMT. Forecast: +2.5% m/m, ex-transport +1.1% m/m. The Fed's Beige Book of regional economic conditions will be published at 18:00GMT.
News-wise: an RBS-led consortium has bid E72bn for ABN Amro, inclusive of a 70% cash element (FT website).
2.0021 (yesterday's London morning high) is now a support point. Lower props include 2.0000, 1.9988 and 1.9955 (yesterday's one-week floor). Middle Eastern demand was noted sub-2.0000 yesterday, following a pullback from the post-US existing home sales data high of 2.0046. An option barrier is pegged at 1.9950.
Today's key US event risk is the 14:00GMT disclosure of March new home sales. Forecast: +5.0% m/m, at 890k. US March durable goods orders will be revealed at 12:30GMT. Forecast: +2.5% m/m, ex-transport +1.1% m/m. The Fed's Beige Book of regional economic conditions will be published at 18:00GMT.
News-wise: an RBS-led consortium has bid E72bn for ABN Amro, inclusive of a 70% cash element (FT website).
Yen Outlook (25th April 2007)
JPY continued to trade on the heavy side, albeit in the familiar trade ranges. USD/JPY was locked in a 118.28-73 range with few major flows noted. The market looks to be in a reactive mode, awaiting data out of the US and Japanese data Friday. In the case of Japan, Friday will be a big day with CPI data and the latest BoJ forecasts on the economy due for release.
There was talk the central bank could shift its focus away from inflation and onto GDP growth, which would further increase speculation of a near-term move in rates. Even with this talk, JPY favoured easier levels. Large investment trust launches overnight disappointed in the main, although Nomura did see a good take up in one of its funds. More fresh launches are noted tomorrow and Friday and these look to be supportive along with month-end importer settlements at the Tokyo fix tomorrow.
Supports are seen at 118.40/50, 118.20/30 and 118.00/10. EUR/JPY pushed up towards 162.00 despite expectations of further sales from Japanese investors looking to repatriate some funds on today's large French OAT redemptions and coupon payments (E30 bln+).
There was talk the central bank could shift its focus away from inflation and onto GDP growth, which would further increase speculation of a near-term move in rates. Even with this talk, JPY favoured easier levels. Large investment trust launches overnight disappointed in the main, although Nomura did see a good take up in one of its funds. More fresh launches are noted tomorrow and Friday and these look to be supportive along with month-end importer settlements at the Tokyo fix tomorrow.
Supports are seen at 118.40/50, 118.20/30 and 118.00/10. EUR/JPY pushed up towards 162.00 despite expectations of further sales from Japanese investors looking to repatriate some funds on today's large French OAT redemptions and coupon payments (E30 bln+).
Euro Outlook (25th April 2007)
The EUR took another step higher from the European open and EUR/USD cleared barriers at 1.3650. The market now has the 1.3667 all time high in its sights and there is talk of further option exotics at 1.3675, 1.3685 and 1.3700. It looked like a Dollar move from the European open with Cable jumping to levels above 2.0050, USD/CHF on the slide and USD/JPY trading lower.
News that RBS was still in the hunt for ABN will also have added support for the Single Currency. A stronger than expected German IFO, 108.6, had little impact with a good number heavily factored. EUR/USD edged up 10 pips to 1.3648 initially then after a brief bout of consolidation edged to new session highs of 1.3659. Initial resistance is at the all time high and then things get a little patchy.
A 2% moving average envelope comes in at 1.3850 and then we are into synthetic territory with 1995 levels at 1.4160 and 1.4535. The 10-day MA provides support at 1.3580 with Monday's 1.3540 the level behind. We look for 1.3620 pullbacks before a move on 1.3700 but consolidation may well frustrate.
News that RBS was still in the hunt for ABN will also have added support for the Single Currency. A stronger than expected German IFO, 108.6, had little impact with a good number heavily factored. EUR/USD edged up 10 pips to 1.3648 initially then after a brief bout of consolidation edged to new session highs of 1.3659. Initial resistance is at the all time high and then things get a little patchy.
A 2% moving average envelope comes in at 1.3850 and then we are into synthetic territory with 1995 levels at 1.4160 and 1.4535. The 10-day MA provides support at 1.3580 with Monday's 1.3540 the level behind. We look for 1.3620 pullbacks before a move on 1.3700 but consolidation may well frustrate.
Tuesday, April 24, 2007
GBP/USD: Consolidating Gains after Poor US Data
GBP/USD is consolidating gains after approaching 2.0050 in the wake of poor US housing data. Some of the 8.4% decline in March closing is blamed on bad winter weather. GBP/USD is badly lagging EUR/USD as the single currency came within a few pips of its high for the recent rally.
In contrast, cable stalled more than 80 pips below its highs from last Wednesday. A larger than expected drop in the CBI orders index and a deep pullback in export orders helped prompt GBP underperformance. Bids are eyed at 2.0015/20 and 1.9990/85 on dips near-term. Resistance comes in at 2.0050/60.
In contrast, cable stalled more than 80 pips below its highs from last Wednesday. A larger than expected drop in the CBI orders index and a deep pullback in export orders helped prompt GBP underperformance. Bids are eyed at 2.0015/20 and 1.9990/85 on dips near-term. Resistance comes in at 2.0050/60.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] is nearing the end of a two-month avance, that being the third instance of the pattern dating back to last October. Slowing momentum readings currently are consistent with what occurred at other tops, and the market could easily correct soon or extend the pattern slightly into early May.
The gold ETF (GLD) has made higher highs compared to late February (current futures did not), but suffers from the same bearish divergence condition on momentum studies. While longer-term conditions look very bright for gold, weekly resistance at $701.50-05.50 Jun remains a key hurdle to get past.
In [oil], daily bear trends turned neutral on Monday with the strong upsurge in Jun futures. As mentioned, monthly trends are on track to turn bullish at month's end, fortified by yesterday's strong showing. Weekly resistance at $66.35-45 has nearly been tapped against today; daily barriers are at $66.67-67.00.
Daily trendlines from late March have been broken to the upside today on minimal gains, and Elliott wave work shows the market having additional bullish potential. Just holding above $66 Jun will keep bulls on the right path.
The gold ETF (GLD) has made higher highs compared to late February (current futures did not), but suffers from the same bearish divergence condition on momentum studies. While longer-term conditions look very bright for gold, weekly resistance at $701.50-05.50 Jun remains a key hurdle to get past.
In [oil], daily bear trends turned neutral on Monday with the strong upsurge in Jun futures. As mentioned, monthly trends are on track to turn bullish at month's end, fortified by yesterday's strong showing. Weekly resistance at $66.35-45 has nearly been tapped against today; daily barriers are at $66.67-67.00.
Daily trendlines from late March have been broken to the upside today on minimal gains, and Elliott wave work shows the market having additional bullish potential. Just holding above $66 Jun will keep bulls on the right path.
EUR/USD: Modest Profit-Taking; Now the Hard Part Begins
EUR/USD reached 1.3635 in the wake of the poor US housing and consumer confidence data. It looks like the easy money has been made for the move and now dealers will have to contend with protection of barriers at 1.3650 and natural sellers ahead of the record highs at 1.3667. 1.3610/15 is first support on dips with plenty more at 1.3580/85.
Swiss Outlook (24th April 2007)
Franc buy-backs accelerated as the European morning progressed and USD/CHF finally broke below 1.2075 support as EUR/CHF broke lower. The cross now eyes a run at 1.6350/55 technical support. Domestic dealers look to the 16:15 GMT speech from Hildebrand out of Zurich.
The SNB directorate member is set to speak on "considerations about the Swiss Franc's Exchange Rate" and should the central banker allude to more aggressive rate tightening then the CHF to rally further can be expected. Earlier Swiss trade data confirmed the continued above-trend growth in the mountain economy. However, it is the Friday KoF Leading Indicator that remains the key event-risk for the Swissie and a 2.00 headline is a viable outcome.
US data into North American trading will decide the fate of USD/CHF with Franc crosses likely to forced into bounces should the US unit rebound following the 14:00 GMT release of existing home sales and consumer confidence. USD/CHF currently eyes a drop back to the 1.2050 level, any break below here eyes a full retracement back to the April 19th low 2-pips shy of the 1.2000 mark.
The SNB directorate member is set to speak on "considerations about the Swiss Franc's Exchange Rate" and should the central banker allude to more aggressive rate tightening then the CHF to rally further can be expected. Earlier Swiss trade data confirmed the continued above-trend growth in the mountain economy. However, it is the Friday KoF Leading Indicator that remains the key event-risk for the Swissie and a 2.00 headline is a viable outcome.
US data into North American trading will decide the fate of USD/CHF with Franc crosses likely to forced into bounces should the US unit rebound following the 14:00 GMT release of existing home sales and consumer confidence. USD/CHF currently eyes a drop back to the 1.2050 level, any break below here eyes a full retracement back to the April 19th low 2-pips shy of the 1.2000 mark.
Sterling Outlook (24th April 2007)
Cable has run into resistance just shy of touted offers at 2.0020, after tripping some buy stops above 2.0000. Those stops helped the rate push its recovery envelope from an Asian session one-week low of 1.9955. Corporate sell interest was sated into 2.0000.
Sterling's Asian session fall to 1.9955 was reportedly fuelled by USD buying related to AstraZeneca's $15.6bn cash purchase of MedImmune. There is speculation that an exotic option barrier resides at 1.9950. Sell stops are tipped below 1.9950, with more touted sub-1.9940 (Apr 16 high). A 1.9985 option strike rolls off at today's 10am Eastern NY cut (14:00GMT).
In testimony to the TSC, BoE Governor Mervyn King reiterated that he is determined to bring UK CPI back to its 2.0% target level (Reuters).
April's CBI industrial trends survey will be disclosed at 13:15GMT. Headline balance forecast: +5, from +8 in March. April's US consumer confidence gauge ensues at 14:00GMT. Forecast: 105.0. US March existing home sales are also due at 14:00GMT. Forecast: 6.40mn.
Sterling's Asian session fall to 1.9955 was reportedly fuelled by USD buying related to AstraZeneca's $15.6bn cash purchase of MedImmune. There is speculation that an exotic option barrier resides at 1.9950. Sell stops are tipped below 1.9950, with more touted sub-1.9940 (Apr 16 high). A 1.9985 option strike rolls off at today's 10am Eastern NY cut (14:00GMT).
In testimony to the TSC, BoE Governor Mervyn King reiterated that he is determined to bring UK CPI back to its 2.0% target level (Reuters).
April's CBI industrial trends survey will be disclosed at 13:15GMT. Headline balance forecast: +5, from +8 in March. April's US consumer confidence gauge ensues at 14:00GMT. Forecast: 105.0. US March existing home sales are also due at 14:00GMT. Forecast: 6.40mn.
Yen Outlook (24th April 2007)
Interest for carry trades was tempered in the European morning. JPY was better bid in Asia, with most JPY-pairs trading lower. EUR/JPY was under pressure the back of large EZ bond redemptions and coupon payments and AUD/JPY suffered after weaker than expected CPI. This drove price action via USD/JPY. However, good Japanese real money interest at the lows put a floor in place and this enabled the JPY crosses to recover recent losses.
EUR/JPY made the most impressive gains, clearing 161.00 offers to trigger stops above. AUD/JPY also made up ground and this fueled follow through speculative JPY selling across the board. USD/JPY was able to clear 118.70 and 118.80 to print a 118.94 high, while EUR/JPY extended to 161.49. Focus will turn to US confidence numbers and existing home sales in the afternoon session.
There is still some concern over the outlook for the US economy, which will drive dollar sentiment in the afternoon session. Elsewhere, growing perceptions of a Japanese rate hike may work against USD/JPY and EUR/JPY's topside in spite of today's recovery; and Golden Week holiday may also begin to temper speculative activity.
EUR/JPY made the most impressive gains, clearing 161.00 offers to trigger stops above. AUD/JPY also made up ground and this fueled follow through speculative JPY selling across the board. USD/JPY was able to clear 118.70 and 118.80 to print a 118.94 high, while EUR/JPY extended to 161.49. Focus will turn to US confidence numbers and existing home sales in the afternoon session.
There is still some concern over the outlook for the US economy, which will drive dollar sentiment in the afternoon session. Elsewhere, growing perceptions of a Japanese rate hike may work against USD/JPY and EUR/JPY's topside in spite of today's recovery; and Golden Week holiday may also begin to temper speculative activity.
Euro Outlook (24th April 2007)
Support into 1.3550 once more propped EUR/USD and as a result the European morning has seen the price consolidate the early bounce off the large Asian and option related buying. Dealers speculate over the presence of 1.3550 expiries intraday while Euro Zone data failed to match upbeat expectations and this reinforced the 1.3505/80 range ahead of the NorAm open.
Looking ahead, the offers from 1.3575 to 1.3585 and the option expiries at 1.3600 will come into view should US existing home sales and consumer confidence, both at 14:00 GMT, disappoint. One German name sees this brace as the first test to the sustainability of recent technical-led USD gains. However, over at IFR, they are looking for the data tomorrow, durable goods, to exacerbate concerns over business investment and keep the all-time highs at 1.3666 in view over the medium-term.
Therefore, expect more support on EUR/USD dips in the short-run. Should the Dollar eke further support and offset the Asian Central Bank sales of late then 1.3535 will be a key intraday support level and trigger with a run at 1.3500 then eyed on a clear break.
Looking ahead, the offers from 1.3575 to 1.3585 and the option expiries at 1.3600 will come into view should US existing home sales and consumer confidence, both at 14:00 GMT, disappoint. One German name sees this brace as the first test to the sustainability of recent technical-led USD gains. However, over at IFR, they are looking for the data tomorrow, durable goods, to exacerbate concerns over business investment and keep the all-time highs at 1.3666 in view over the medium-term.
Therefore, expect more support on EUR/USD dips in the short-run. Should the Dollar eke further support and offset the Asian Central Bank sales of late then 1.3535 will be a key intraday support level and trigger with a run at 1.3500 then eyed on a clear break.
Saturday, April 21, 2007
USD/CHF: Buck Struggles Higher As Bears Pare Back Due To Techs
In a deceptively low range week that imbued traders with the feeling that the dollar was collapsing, but currently reflects a net 50pt loss for the greenback down 0.8 at current levels of 1.2080 market participants are reviewing the week's performance against the all important weekly close. On the weekly study there is a support line that goes back to the Dec 2004 1.1290 low, across the Dec 2006 1.1885 low, which comes in at 1.1995 today, with the 1.2004 week's low having just kissed it for all intents and purposes.
Furthermore the average downturn in the stochastics for the past two years has ended after roughly two months, and extended that by a week this week, with nascent signs that RSI could be diverging, i.e. USD/CHF is not as weak at 1.2080 as it was when it closed the week at similar levels in early March, 42.2 vs 40.8. Given the dollar's reluctance to hold at lower levels, momentum accounts are eyeing these indicators carefully. Nobody is calling a turn yet, however given the bounce off key support why not take a few chips off the table, particularly as EUR/CHF at 1.6435 could be heading for its highest weekly close since August 1998 (composite).
USD/CHF does not look like it has the energy to scale earlier highs (1.2090) nor above last week's close (1.2150) so the bears remain in control, and further downside to be expected next week, as strongly trending markets normally close the week, and open the week in the direction of the trend. Today USD/CHF has eked out a rare gain, its first of the week - sign of change?
Furthermore the average downturn in the stochastics for the past two years has ended after roughly two months, and extended that by a week this week, with nascent signs that RSI could be diverging, i.e. USD/CHF is not as weak at 1.2080 as it was when it closed the week at similar levels in early March, 42.2 vs 40.8. Given the dollar's reluctance to hold at lower levels, momentum accounts are eyeing these indicators carefully. Nobody is calling a turn yet, however given the bounce off key support why not take a few chips off the table, particularly as EUR/CHF at 1.6435 could be heading for its highest weekly close since August 1998 (composite).
USD/CHF does not look like it has the energy to scale earlier highs (1.2090) nor above last week's close (1.2150) so the bears remain in control, and further downside to be expected next week, as strongly trending markets normally close the week, and open the week in the direction of the trend. Today USD/CHF has eked out a rare gain, its first of the week - sign of change?
GBP/USD: Well Supported on Dips; Intraday Shorts Square
Dealers note some late short-covering by interbank names out of London as demand for cable remains solid in the 1.9985/90 area. Small offers are noted at 2.0050/55 and again toward 2.0070/75.
EUR/GBP is giving back much of yesterday's strength despite less robust than expected retail sales in the UK this morning. GBP/JPY is gaining ground as a result, bolstered by widening rate differentials and rallying equities, symbolizing renewed risk appetites. Cable trades at 2.0049, EUR/GBP at 0.6785 and GBP/JPY at 238.25.
EUR/GBP is giving back much of yesterday's strength despite less robust than expected retail sales in the UK this morning. GBP/JPY is gaining ground as a result, bolstered by widening rate differentials and rallying equities, symbolizing renewed risk appetites. Cable trades at 2.0049, EUR/GBP at 0.6785 and GBP/JPY at 238.25.
USD/JPY: Increased Expectations of Range-trading
Traders say that expectations for range-trading on USD/JPY are increasing in coming sessions with the key risk events next week, Japan CPI data and the BOJ report having muted effect on the market, particularly from the BOJ report with inflation expectations already leaked to the press. As we reported back on April 16th, the Nikkei said that the BOJ forecast for CPI is expected to rise to 0.2/0.3%, with the Yomiuri reporting overnight a similar forecast of 0.3% for the report.
BOJ Fukui has already widely hinted in recent weeks that CPI due Friday, will continue to be soft with prior declines in oil prices expected to feed through to prices. USD/JPY is at 118.83 currently after this morning's rally stalled near 119.00. Fresh carry trade demand for JPY crosses fuelled the rally in the wake of firm US stock markets. Offers remain at 119.00 with stops at 119.05 to 119.20.
Dealers however are noting the further fall in JPY vols and increased expectations that with next week's risk event impact muted by the press reports, that USD/JPY will range-trade into the Golden Week holidays. 117-120 is seen by some, with option-related buying from 117.50 and similar option-related selling ahead of 120.00.
BOJ Fukui has already widely hinted in recent weeks that CPI due Friday, will continue to be soft with prior declines in oil prices expected to feed through to prices. USD/JPY is at 118.83 currently after this morning's rally stalled near 119.00. Fresh carry trade demand for JPY crosses fuelled the rally in the wake of firm US stock markets. Offers remain at 119.00 with stops at 119.05 to 119.20.
Dealers however are noting the further fall in JPY vols and increased expectations that with next week's risk event impact muted by the press reports, that USD/JPY will range-trade into the Golden Week holidays. 117-120 is seen by some, with option-related buying from 117.50 and similar option-related selling ahead of 120.00.
EUR/USD: European Comments Taken in Stride
Eurogroup head Juncker is on the wires saying the Euro forex rate reflects the strong economic recovery. Inflation is under control, he goes on. The market has grown numb to comments from the finance ministers today. While most showing little concern over EUR strength, this is hardly news to the market at this stage. Friday afternoon looks like it will shape up to be a carbon copy of Thursday with EUR/USD likely plying a range 10 pips either side of 1.3600 barring an unforeseen "tape bomb". It trades now at 1.3598.
Friday, April 20, 2007
Swiss Outlook (20th April 2007)
There seems to be no escape for the low yielding Swissie and the return to the carry trade has forced the unit onto the back-foot into the European morning. This comes despite the Dollar hitting fresh multi-year lows against the better paying Euro. Carry trades have come back into favor since the comments late on Thursday from a German official "many are comfortable with Euro strength".
Swiss data has been overlooked as a 25bp Q2 hike from the SNB has largely been priced in and as a result USD/CHF has headed higher with offers into 1.2060/65 soon absorbed. The break into the 1.2070's is reported to have removed stops with 1.2076 printing as these caused a slight liquidity vacuum.
Should the higher levels be cemented then a slow drift towards 1.2090 can be expected with the next big test coming into the 1.2100 area. Against the Euro the Franc has also struggled on fresh CHF shorting. EUR/CHF has broken above 1.6425/30 to hit 1.6436 and the all-time high at 1.6468 should come back into view if the cross can force a break above 1.6450 standing supply.
Swiss data has been overlooked as a 25bp Q2 hike from the SNB has largely been priced in and as a result USD/CHF has headed higher with offers into 1.2060/65 soon absorbed. The break into the 1.2070's is reported to have removed stops with 1.2076 printing as these caused a slight liquidity vacuum.
Should the higher levels be cemented then a slow drift towards 1.2090 can be expected with the next big test coming into the 1.2100 area. Against the Euro the Franc has also struggled on fresh CHF shorting. EUR/CHF has broken above 1.6425/30 to hit 1.6436 and the all-time high at 1.6468 should come back into view if the cross can force a break above 1.6450 standing supply.
Sterling Outlook (20th April 2007)
Cable rallied to intra-day highs just shy of 2.0070 in early European trade, amid a rumour that annualized UK March retail sales growth might come in well above forecast, at 5.2%. Asian Central Bank demand at 2.0030/40 propped the pre-release pullback with a half-cent drop to intra-day lows just shy of 1.9990 ensuing after the data's 08:30GMT disclosure. Although annualized sales growth came in 0.1% above the 4.7% consensus forecast, there was disappointment that it had failed to match the pre-release rumour number.
Highs just shy of 2.0050 have been notched on the recovery rally from those pre-1.9990 lows. Resistance levels north of 2.0070/75 include 2.0100 and 2.0134 (Wednesday's 26-year peak). Exotic option barriers reside at 2.0150, 2.0175, 2.0200, 2.0250, 2.0300, 2.0450, 2.0500, 2.0700, 2.0750 and 2.0800+.
There is speculation that this weekend's Sunday Times may include a relatively dovish article from economics editor David Smith although a 25bp UK base rate rise to 5.5% next month is already a done deal. A US investment house touts August for a follow-up 25bp hike to 5.75%.
Highs just shy of 2.0050 have been notched on the recovery rally from those pre-1.9990 lows. Resistance levels north of 2.0070/75 include 2.0100 and 2.0134 (Wednesday's 26-year peak). Exotic option barriers reside at 2.0150, 2.0175, 2.0200, 2.0250, 2.0300, 2.0450, 2.0500, 2.0700, 2.0750 and 2.0800+.
There is speculation that this weekend's Sunday Times may include a relatively dovish article from economics editor David Smith although a 25bp UK base rate rise to 5.5% next month is already a done deal. A US investment house touts August for a follow-up 25bp hike to 5.75%.
Yen Outlook (20th April 2007)
The market was held in a narrow trading range. Yesterday's plunge below 118.00 in USD/JPY was all but forgotten today as the pair pushed on to 118.82. A pick up in leverage fund activity and interest from investment names was noted. The pair was unable to overcome 118.80/90 offers and drifted into 118.60. There was little movement for the remainder of the session.
EUR/JPY settled at 161.40 after surging higher in early European trade to trigger stops at 161.75. Offers came in ahead of 162.00 and the pair printed a 161.97 high before profit takers moved in. Some European concern over the lofty Euro weighed, yet investment trust demand and carry trade interest limited the pair to a steady drift lower. A limited data schedule should limit price action into the weekend.
Option strikes in EUR/JPY at 161.00 may increase profit taking activity, while USD/JPY has outstanding interest of its own at 117.25 and 118.50 and 118.65. Next week sees a slew of investment trust launches. Amounts of Y600 billion are due and should result in decent trust bank and custodial name demand for the JPY crosses and USD/JPY on any pullbacks.
EUR/JPY settled at 161.40 after surging higher in early European trade to trigger stops at 161.75. Offers came in ahead of 162.00 and the pair printed a 161.97 high before profit takers moved in. Some European concern over the lofty Euro weighed, yet investment trust demand and carry trade interest limited the pair to a steady drift lower. A limited data schedule should limit price action into the weekend.
Option strikes in EUR/JPY at 161.00 may increase profit taking activity, while USD/JPY has outstanding interest of its own at 117.25 and 118.50 and 118.65. Next week sees a slew of investment trust launches. Amounts of Y600 billion are due and should result in decent trust bank and custodial name demand for the JPY crosses and USD/JPY on any pullbacks.
Euro Outlook (20th April 2007)
EUR/USD erased the 1.3625 option barriers in Asia before fresh Russian buying spurred further gains into early European action. 1.3638 was hit but spot failed to hold the highs as jaw-boning and protection of topside options structures weighed. Bids into the 1.3600/05 area then propped. Should spot break below 1.3600 then a small pre-weekend clearance of weaker longs could be seen.
Sell-stops are located sub-1.3600, however, with decent buyers then noted into 1.3585 and better sized stops noted below 1.3580 it will take a break below this latter level before the markets begin to talk of a more significant correction. On the topside, option barriers into 1.3650 will remain protected but some London dealers suggest that a rally towards 1.3660 could unfold ahead of the weekend.
Coincidentally, central bank sellers are tipped to sit at 1.3660 with the all-time high in EUR/USD then eyed at 1.3666. Elsewhere, official rhetoric on the "high level of the Euro" has increased but it is yet to hold the panicked tones witnessed amid the last test of these levels, in late 2004 when 1.3666 printed.
Sell-stops are located sub-1.3600, however, with decent buyers then noted into 1.3585 and better sized stops noted below 1.3580 it will take a break below this latter level before the markets begin to talk of a more significant correction. On the topside, option barriers into 1.3650 will remain protected but some London dealers suggest that a rally towards 1.3660 could unfold ahead of the weekend.
Coincidentally, central bank sellers are tipped to sit at 1.3660 with the all-time high in EUR/USD then eyed at 1.3666. Elsewhere, official rhetoric on the "high level of the Euro" has increased but it is yet to hold the panicked tones witnessed amid the last test of these levels, in late 2004 when 1.3666 printed.
Thursday, April 19, 2007
EUR/USD: Ticking Up Toward Resistance ahead of Philly Fed
EUR/USD is firming toward the top of the US range as carry trades recover some of the ground lost overnight and European bond yields rise relative to US yields. Philly Fed data hits the tape in about thirty minutes and dealers will use a weak print as ammo to go after 1.3625 barriers if the opportunity presents itself. More barriers are eyed at 1.3650 and 1.3675, either side of the late 2004 high at 1.3667. Bids come in on dips to 1.3580/90 and EUR/USD continues to whip around freely between these tow levels. It trades now at 1.3612.
GBP/USD: Receding China Panic Helping Prop Pound
GBP/USD is in recovery mode after overnight fears of a Chinese rate hike helped prompt dumping of carry trades. As those jitters settle down, the pound is recovering across the board, boosted particularly by GBP/JPY. Reports of Russian buying interest on dips in cable are helping giving spec longs courage to hang on this morning as well.
Rebounding US equities are helping give the market the green light to reacquire riskier assets like GP/JPY. Offers in cable are eyed in the 2.0040/50 window near-term while support is seen in the 1.9985/90 region.
Rebounding US equities are helping give the market the green light to reacquire riskier assets like GP/JPY. Offers in cable are eyed in the 2.0040/50 window near-term while support is seen in the 1.9985/90 region.
USD/CHF: Greenback Slides As Cross Pressure Abates
Spot USD/CHF has slipped back below 1.2040 again after an abortive attempt to probe for additional stops that stalled out at the 1.2059 high. The vulnerable stops are out of the way, and without the relentless buying of GBP/CHF and EUR/CHF which forced those two pairs up to 2.4125 and 1.6386 at the peak, USD/CHF has slipped back down.
GBP/CHF has slipped back to 2.4105, and EUR/CHF has dipped below 1.6380, however there are a few nervous shorts in the latter pair that are eyeing the 1.6390 stops. With no "natural" USD buyers at the moment, and in the absence of the crosses throwing a bid into USD/CHF, spot has declined to 1.2038, and once again feels heavy.
GBP/CHF has slipped back to 2.4105, and EUR/CHF has dipped below 1.6380, however there are a few nervous shorts in the latter pair that are eyeing the 1.6390 stops. With no "natural" USD buyers at the moment, and in the absence of the crosses throwing a bid into USD/CHF, spot has declined to 1.2038, and once again feels heavy.
USD/JPY: Slumps Sharply With USD Bearishness Dominating
USD/JPY hit highs of 118.60 on the back of stop-loss buying on the break of 118.50 but has reversed sharply, dropping under 118.30 as USD bearishness reasserts itself. Traders are still looking to sell rallies on USD/JPY towards 118.60/70 and note that only the carry trade stops provided the support for the USD/JPY this morning.
However, small stops remain above 118.70/80 on USD/JPY that will remain vulnerable in a short-squeeze. The bearish USD sentiment has been reflected in AUD and NZD buying from model funds today that helped fuel the JPY cross rebound.
Traders also say that the fact that US stock losses have been muted compared to the Asian sell-off has also encouraged carry trade buybacks. Bids on dips remain much lower on USD/JPY around 117.50/60 with option defense noted ahead of this level.
However, small stops remain above 118.70/80 on USD/JPY that will remain vulnerable in a short-squeeze. The bearish USD sentiment has been reflected in AUD and NZD buying from model funds today that helped fuel the JPY cross rebound.
Traders also say that the fact that US stock losses have been muted compared to the Asian sell-off has also encouraged carry trade buybacks. Bids on dips remain much lower on USD/JPY around 117.50/60 with option defense noted ahead of this level.
GBP/USD: Philly Fed Index Awaited, UK Retail Sales Tomorrow
Fresh market-moving influence over GBP/USD may be exerted by the 16:00GMT disclosure of April's Philly Fed index. This is forecast at 2.0, compared to 0.2 in March. Sterling resistance levels include 2.0050, 2.0074 (Tuesday's top), 2.0095 (today's Asian session peak) and 2.0134 (yesterday's 26-year high).
Exotic option barriers are located at 2.0150, 2.0175, 2.0200, 2.0250, 2.0300, 2.0450 and 2.0500+. Support points reside at 1.9986 (early Europe low), 1.9940 (Monday's high), 1.9917 (Jan 23 top) and 1.9882 (Tuesday's low). Tomorrow's key event risk is the 08:30GMT unveiling of UK March retail sales. Forecast: +0.5% m/m, +4.7% y/y.
Exotic option barriers are located at 2.0150, 2.0175, 2.0200, 2.0250, 2.0300, 2.0450 and 2.0500+. Support points reside at 1.9986 (early Europe low), 1.9940 (Monday's high), 1.9917 (Jan 23 top) and 1.9882 (Tuesday's low). Tomorrow's key event risk is the 08:30GMT unveiling of UK March retail sales. Forecast: +0.5% m/m, +4.7% y/y.
US TECHS: Commodities Outlook; Gold and Oil
Today's downturn in Jun gold is consistent with bearish divergence readings on daily momentum studies noted in recent days. The near-retest of late Feb peak prices obviously could not get past $700 and was accompanied by weaker momentum.
Longer-term uptrends dating back to last Oct come in just below $655 Jun and are rising about $0.50/day. A test, though not necessarily in the cards, would not disturb the longer-term bullish chart setup in gold. Steeper trendlines from mid-March come in at just over $678 today and are rising by about $1.50/day.
In [oil], the market has seen a $3.50 range so far for the week, with the month-to-date range well inside that of last month's nearly $9 range. Daily momentum, while still in positive ground, peaked earlier this month and is heading lower. Daily trend models turned bearish yesterday, with more weakness needed to trigger Trend Intensity, a separate model, into a bearish signal.
Monthly charts show an unusually tight convergence of supports, with three projections in the $62.10-35 band, worth noting in the event of more downside work. RSI is approaching 40, with bulls best served if that momentum oscillator can hold above. Intraday resistance is as close at $63.90/64.05.
Longer-term uptrends dating back to last Oct come in just below $655 Jun and are rising about $0.50/day. A test, though not necessarily in the cards, would not disturb the longer-term bullish chart setup in gold. Steeper trendlines from mid-March come in at just over $678 today and are rising by about $1.50/day.
In [oil], the market has seen a $3.50 range so far for the week, with the month-to-date range well inside that of last month's nearly $9 range. Daily momentum, while still in positive ground, peaked earlier this month and is heading lower. Daily trend models turned bearish yesterday, with more weakness needed to trigger Trend Intensity, a separate model, into a bearish signal.
Monthly charts show an unusually tight convergence of supports, with three projections in the $62.10-35 band, worth noting in the event of more downside work. RSI is approaching 40, with bulls best served if that momentum oscillator can hold above. Intraday resistance is as close at $63.90/64.05.
Swiss Outlook (19th April 2007)
Surprisingly orderly price action for the Swiss Franc considering all the fresh carry trade activity. Worries over the Chinese economy and the risk of overheating added to a strong data release out of Japan brought about a Yen revival and as the carry traders adjusted their exposure to the Japanese unit the Swiss was caught up in the low yields rally.
USD/CHF opened in London at 1.2020, edged up to 1.2045 before the market started to realign positions. The Franc firmed to 1.2015 and has been held tight around the 1.2020 level since. A heavy EUR/CHF mirrored the spot price action with opening highs of 1.6349, a dip to 1.6322 and then a recovery to and consolidation at 1.6335-40.
As the profit taking on the carry trade began to ebb the focus switched to the Swiss ZEW release. A surprise pick up in the sentiment indicator to -3.5 in April from -28 in March added further to the Swiss Franc's firming bias but was unable to shake the Market from a bout of sideways action. Still favour the CHF but nervous markets will keep Thursday ranges tight.
USD/CHF opened in London at 1.2020, edged up to 1.2045 before the market started to realign positions. The Franc firmed to 1.2015 and has been held tight around the 1.2020 level since. A heavy EUR/CHF mirrored the spot price action with opening highs of 1.6349, a dip to 1.6322 and then a recovery to and consolidation at 1.6335-40.
As the profit taking on the carry trade began to ebb the focus switched to the Swiss ZEW release. A surprise pick up in the sentiment indicator to -3.5 in April from -28 in March added further to the Swiss Franc's firming bias but was unable to shake the Market from a bout of sideways action. Still favour the CHF but nervous markets will keep Thursday ranges tight.
Sterling Outlook (19th April 2007)
Tripped stops below 2.0000 helped depress cable to an intra-day low of 1.9986 in early European trade, as risk appetite was reduced prior to the 07:00GMT release of Chinese GDP and CPI data. The rate"s subsequent half-cent+ recovery rally was aided by Eastern European name buying of GBP/JPY.
Further stops are touted sub-1.9980. Bear targets/support points below include 1.9940 (Monday's high), 1.9917 (Jan 23 top) and 1.9882 (Tuesday's low).
Another large 2.0000 option strike rolls off at today's 14:00GMT NY cut, to follow yesterday's cumulative GBP 300mn 2.0000 expiry. Today's 2.0000 strike is reportedly owned by a US investment house.
GBP/USD resistance levels include 2.0050, 2.0074 (Tuesday's top), 2.0095 (today's Asian session peak) and 2.0134 (yesterday's 26-year high). Exotic option barriers are located at 2.0150, 2.0175, 2.0200, 2.0250 and 2.0300+.
US weekly jobless claims are due at 12:30GMT. Forecast: 320k. April's Philly Fed survey index ensues at 16:00GMT. Forecast: 2.0. UK March retail sales figures will be unveiled at 08:30GMT tomorrow.
Further stops are touted sub-1.9980. Bear targets/support points below include 1.9940 (Monday's high), 1.9917 (Jan 23 top) and 1.9882 (Tuesday's low).
Another large 2.0000 option strike rolls off at today's 14:00GMT NY cut, to follow yesterday's cumulative GBP 300mn 2.0000 expiry. Today's 2.0000 strike is reportedly owned by a US investment house.
GBP/USD resistance levels include 2.0050, 2.0074 (Tuesday's top), 2.0095 (today's Asian session peak) and 2.0134 (yesterday's 26-year high). Exotic option barriers are located at 2.0150, 2.0175, 2.0200, 2.0250 and 2.0300+.
US weekly jobless claims are due at 12:30GMT. Forecast: 320k. April's Philly Fed survey index ensues at 16:00GMT. Forecast: 2.0. UK March retail sales figures will be unveiled at 08:30GMT tomorrow.
Yen Outlook (19th April 2007)
JPY made up further ground as the market favoured risk reduction. The market followed on from yesterday's session, yet saw further JPY gains amid rumours of a near-term rate hike in Japan after good data and speculation of a Chinese rate hike. Fears of much stronger than expected Chinese data spooked the market, yet the GDP release came in just above consensus at 11.1% y/y, while CPI showed 3.3%.
Market participants sold JPY on the release and USD/JPY was able to rally from the 117.60 area up towards 118.00. EUR/JPY rallied sharply amid Japanese bids at 159.60 and reports of good Eastern European demand for EUR/JPY, GBP/JPY and NZD/JPY. AUD/JPY and NZD/JPY posted modest recoveries, with bargain hunters and Japanese margin traders taking advantage of the cheaper levels.
USD/JPY did little to impact the broader market, with prices held close to 117.90 for a large part of the European morning after the recovery. Option strikes at 118.00 and an overhang of offers capped, while the downside elicited support amid JPY cross bid interest and a large Japanese presence towards the 117.60 region.
Market participants sold JPY on the release and USD/JPY was able to rally from the 117.60 area up towards 118.00. EUR/JPY rallied sharply amid Japanese bids at 159.60 and reports of good Eastern European demand for EUR/JPY, GBP/JPY and NZD/JPY. AUD/JPY and NZD/JPY posted modest recoveries, with bargain hunters and Japanese margin traders taking advantage of the cheaper levels.
USD/JPY did little to impact the broader market, with prices held close to 117.90 for a large part of the European morning after the recovery. Option strikes at 118.00 and an overhang of offers capped, while the downside elicited support amid JPY cross bid interest and a large Japanese presence towards the 117.60 region.
Euro Outlook (19th April 2007)
65-pip range through early Europe with a slightly softer EUR as the market takes on board the latest economic forecasts from the leading German think tanks. The numbers were circulating the market last session and this could explain why the EUR is not reacting. Dollar pep was mainly driven by the unwinding of Yen cross longs following firm Japanese data but it was the German forecasts that had the latest impact.
The institutes are looking for 07 growth of 2.4% vs 1.4% in their last report and CPI of 1.8%, down from 2.3%. The bottom line from the latest report is that the German economy is undergoing a strong recovery and that the ECB will tighten policy by a 1/4-point to 4.0% by the middle of the year. EUR/USD dipped from 1.3620 to 1.3560 and is now having a look at the 1.3600 level.
The Dollar was constructive from the open but is clearly lost traction as the European morning paned out. Good demand for EUR/USD in the 1.3560-70 area helped put a base under the market and with further bids touted down to 1.3540 the market will be reluctant to test the bear side again.
The institutes are looking for 07 growth of 2.4% vs 1.4% in their last report and CPI of 1.8%, down from 2.3%. The bottom line from the latest report is that the German economy is undergoing a strong recovery and that the ECB will tighten policy by a 1/4-point to 4.0% by the middle of the year. EUR/USD dipped from 1.3620 to 1.3560 and is now having a look at the 1.3600 level.
The Dollar was constructive from the open but is clearly lost traction as the European morning paned out. Good demand for EUR/USD in the 1.3560-70 area helped put a base under the market and with further bids touted down to 1.3540 the market will be reluctant to test the bear side again.
Wednesday, April 18, 2007
US TECHS: Commodities Outlook; Gold and Oil
Highs set in February on Jun COMEX futures at $699 have not been tackled as the market has treaded water near peaks of the past few days. Uptrends from early April are at $683.50 today and from March are at $677.
Daily trend models could use a $691 close today to retain their bullish bias; Trend Intensity is solidly bullish and less at risk of a neutral shift. $700 remains in the market's sights, with weekly objectives at $705 likely to be seen soon after. Intraday resistance is at $692.50-93.00.
In [oil] (now tracking Jun futures), the correction has returned prices to just above 50-day moving averages at $63.25, with the 38% retracement level from last July to this January coming in just above there at $63.50. Other measuring tools reinforce the $63.50 area as very important support, and the bounce that occurred following the overnight slide of over $1 confirms that view.
With ADX, a trend study, having topped out and Trend Intensity flat the past seven days (through Tuesday), more consolidation is in the works, and the roughly $62-67 zone could well define near-term trading action.
Daily trend models could use a $691 close today to retain their bullish bias; Trend Intensity is solidly bullish and less at risk of a neutral shift. $700 remains in the market's sights, with weekly objectives at $705 likely to be seen soon after. Intraday resistance is at $692.50-93.00.
In [oil] (now tracking Jun futures), the correction has returned prices to just above 50-day moving averages at $63.25, with the 38% retracement level from last July to this January coming in just above there at $63.50. Other measuring tools reinforce the $63.50 area as very important support, and the bounce that occurred following the overnight slide of over $1 confirms that view.
With ADX, a trend study, having topped out and Trend Intensity flat the past seven days (through Tuesday), more consolidation is in the works, and the roughly $62-67 zone could well define near-term trading action.
EUR/USD: Cross Sales, Profit-taking Cap Rebounds
EUR/USD continues to run into selling in the low 1.3590s with dealers looking to trim long positions as a bit of two-way risk has been reintroduced into the market today. A bevy of rumors made the rounds this morning helping prompt some books squaring but dips were limited to a test of important intraday support at 1.3555.
Stops continue to gather below that level as entrenched longs look to protect the bulk of their profits. Dealers note continued EUR/JPY profit-taking late in European trade, helping weigh on EUR/USD in the near-term. EUR/USD trades at 1.3582.
Stops continue to gather below that level as entrenched longs look to protect the bulk of their profits. Dealers note continued EUR/JPY profit-taking late in European trade, helping weigh on EUR/USD in the near-term. EUR/USD trades at 1.3582.
GBP/USD: Speculation of Fresh CB Reserve Diversification Flow
There is speculation that fresh Central Bank reserve diversification demand for GBP may have aided cable's recovery rally from an early NY intra-day low of 2.0016. That recovery rally ran into resistance at 2.0074 (yesterday's high).
2.0074+ obstacles include 2.0104 (early Europe high), 2.0133 (European morning, 26-year top), and 2.0150. There is exotic option exposure at 2.0150. Further exotic option barriers reside at 2.0175, 2.0200, 2.0250, 2.0300, 2.0450 and 2.0500+.
2.0074+ obstacles include 2.0104 (early Europe high), 2.0133 (European morning, 26-year top), and 2.0150. There is exotic option exposure at 2.0150. Further exotic option barriers reside at 2.0175, 2.0200, 2.0250, 2.0300, 2.0450 and 2.0500+.
Swiss Outlook (18th April 2007)
Into European trading and the Franc has once again been dominated by broader market volatility. Dollar selling has weighed on USD/CHF with the price pushed to a fresh session and years low at 1.2026. The move happened as stops triggered on the break below 1.2050 support with bids into 1.2030 failing to prop.
EUR/CHF sales continue to be looked for to signal fresh weakness will be sustained but as yet the cross has failed to retest key support into 1.6350. Offers in USD/CHF are noted into 1.2050/55 to cap rebounds. Looking ahead, the North American session is devoid of tier one US data releases. The Dollar may take some comfort from this news given that recent economic unveilings have done little to deter the market from selling the USD.
However, with little event-risk of fresh news to underpin the unit any further US unit selling will see USD/CHF look to test the 1.2000 area. Domestic dealers look to the release tomorrow of the Swiss April ZEW economic survey. The data is expected to point to further growth in the mountain economy and this will underpin the Franc.
EUR/CHF sales continue to be looked for to signal fresh weakness will be sustained but as yet the cross has failed to retest key support into 1.6350. Offers in USD/CHF are noted into 1.2050/55 to cap rebounds. Looking ahead, the North American session is devoid of tier one US data releases. The Dollar may take some comfort from this news given that recent economic unveilings have done little to deter the market from selling the USD.
However, with little event-risk of fresh news to underpin the unit any further US unit selling will see USD/CHF look to test the 1.2000 area. Domestic dealers look to the release tomorrow of the Swiss April ZEW economic survey. The data is expected to point to further growth in the mountain economy and this will underpin the Franc.
Sterling Outlook (18th April 2007)
Cable rallied by more than a quarter-cent to a 26-year high of 2.0133 after the 08:30GMT disclosure that UK annualized earnings rose by a much higher-than-expected 4.6% in the three months to February. The robust number increases the risk that the BoE MPC might hike the UK base rate by 50bp to 5.75% next month (May 10). A 25bp increase to 5.5% is already priced in.
Some option-related supply may emerge ahead of 2.0150, a level at which an exotic option barrier resides. Further exotic option exposure is located at 2.0175, 2.0200, 2.0250, 2.0300, 2.0450 and 2.0500+.
2.0104 (early Europe high) is now a support level. Prop points below include 2.0089 (today's Asian session top), 2.0074 (yesterday's peak), 2.0063 (today's Asian session base), 2.0035 and 2.0000. A cumulatively estimated GBP 300mn of 2.0000 option strikes roll off at today's 14:00GMT NY cut. The bulk of those strikes were bought at 10.0 pct and 10.5 pct prior to yesterday's UK CPI topside shock when GBP/USD was trading sub-1.9940. There are more 2.0000 option expiries tomorrow and next Monday (Apr 23).
Some option-related supply may emerge ahead of 2.0150, a level at which an exotic option barrier resides. Further exotic option exposure is located at 2.0175, 2.0200, 2.0250, 2.0300, 2.0450 and 2.0500+.
2.0104 (early Europe high) is now a support level. Prop points below include 2.0089 (today's Asian session top), 2.0074 (yesterday's peak), 2.0063 (today's Asian session base), 2.0035 and 2.0000. A cumulatively estimated GBP 300mn of 2.0000 option strikes roll off at today's 14:00GMT NY cut. The bulk of those strikes were bought at 10.0 pct and 10.5 pct prior to yesterday's UK CPI topside shock when GBP/USD was trading sub-1.9940. There are more 2.0000 option expiries tomorrow and next Monday (Apr 23).
Yen Outlook (18th April 2007)
JPY was largely range bound in the European morning, with focus elsewhere as EUR/USD scaled 1.3600 and GBP/USD pushed through 2.0100. In this environment USD/JPY traded defensively, yet held up relatively well due to ongoing appetite to sell JPY from investors. USD/JPY made a challenge on the mid 118's but was unable to overcome good size bids from importers and real money names from 118.50 down to 118.20.
The pair hovered around 118.60 for the most part and expected to continue in this vein amid a limited data schedule and good size 118.50 and 119.00 expiries. EUR/JPY saw a similar theme, bouncing out of 161.00 amid investor demand, yet unable to make significant gains. Deteriorating technical studies and risk of further bond related JPY demand kept this pair range bound.
Broad EUR strength left the pair tied to the mid 161's, although outstanding 161.00 option strikes could encourage another downside test as the European afternoon progresses. The afternoon session is expected to trade on rate expectations, which should see out-performance in leading European currencies vs JPY, while USD/JPY should range trade as USD weakness offsets.
The pair hovered around 118.60 for the most part and expected to continue in this vein amid a limited data schedule and good size 118.50 and 119.00 expiries. EUR/JPY saw a similar theme, bouncing out of 161.00 amid investor demand, yet unable to make significant gains. Deteriorating technical studies and risk of further bond related JPY demand kept this pair range bound.
Broad EUR strength left the pair tied to the mid 161's, although outstanding 161.00 option strikes could encourage another downside test as the European afternoon progresses. The afternoon session is expected to trade on rate expectations, which should see out-performance in leading European currencies vs JPY, while USD/JPY should range trade as USD weakness offsets.
Euro Outlook (18th April 2007)
1.3600 option barriers were removed amid the European morning move higher. As a result, the focus has now turned to the option triggers at 1.3620 & 25 with barriers also confirmed up at 1.3650 and 1.3675. Protection of these options helped curb the latest stab higher with gamma related supply emerging at 1.3615 to halt the move higher.
Into North American trading and EUR/USD is attempting to consolidate the break into the 1.36's with bids trailing to 1.3595 to help prop. Looking ahead, the North American session is devoid of tier one US data releases. The Dollar may take some comfort from this news given that recent economic unveilings have done little to deter the market from selling the USD.
However, with little event-risk of fresh news to underpin the unit any further US unit selling will see the topside come back into sight. On the downside only a break below 1.3550 support will add pressure and take the focus off the all-time highs at 1.3666. Option traders also note 1.3555 strikes expiring intraday at the NY cut.
Into North American trading and EUR/USD is attempting to consolidate the break into the 1.36's with bids trailing to 1.3595 to help prop. Looking ahead, the North American session is devoid of tier one US data releases. The Dollar may take some comfort from this news given that recent economic unveilings have done little to deter the market from selling the USD.
However, with little event-risk of fresh news to underpin the unit any further US unit selling will see the topside come back into sight. On the downside only a break below 1.3550 support will add pressure and take the focus off the all-time highs at 1.3666. Option traders also note 1.3555 strikes expiring intraday at the NY cut.
Tuesday, April 17, 2007
USD/JPY: Bounces Off Lows; Offers Now at 119.50, Stops Above
Japanese buying and option-related bids are behind the bounce in USD/JPY from 119.06 lows to current levels of 119.27. Offers are now at 119.50 with stops above with more selling interest ahead of 120.00 with stops above. On the downside, stops are reported under 119.00 with more buyers under this level, and larger stops are tipped under 118.80.
Traders see USD/JPY however still holding in a 119-120 range with cross demand still underpinning USD/JPY. Option strikes due on Wednesday are at 119.10 and 120.00 that will also help contribute to range trading. Dealings are fairly subdued now after a hectic morning.
Traders see USD/JPY however still holding in a 119-120 range with cross demand still underpinning USD/JPY. Option strikes due on Wednesday are at 119.10 and 120.00 that will also help contribute to range trading. Dealings are fairly subdued now after a hectic morning.
EUR/USD: Drifts to 1.3570 as JPY Motors
A nice rebound in USD/JPY toward the 119.30 level has helped take some of the upside steam out of EUR/USD but cross buying is helping the single currency rekindle demand toward the 1.3570 level. Dealers see further buying interest toward 1.3550 but a few small trailing stops are starting to gather just below that level. Same story at 1.3525 with bids and stops just below. Dealers look for sustained EUR strength to be maintained this afternoon baring unforeseen events. EUR/USD trades at 1.3570.
USD/JPY: New Bullish Trend Signal Established
The move up on USD/JPY yesterday to 119.87 highs has seen a new bullish trend intensity signal emerged with the indicator rising one notch to 11. The EUR/JPY trend signal remains strongly bullish, rising two notches to 23.
The EUR/USD trend signal is bullish, rising to 24 with the GBP/USD trend signal bullish, rising a notch to 20. The USD/CHF trend signal is neutral at trend-ready levels of 10 while the EUR/GBP trend signal is neutral at 15. These proprietary indicators are updated each trading day after the NY close.
The EUR/USD trend signal is bullish, rising to 24 with the GBP/USD trend signal bullish, rising a notch to 20. The USD/CHF trend signal is neutral at trend-ready levels of 10 while the EUR/GBP trend signal is neutral at 15. These proprietary indicators are updated each trading day after the NY close.
USD/CHF: Fails To Make Clean Break Below 1.2070
Spot failed to make a clear break below 1.2070, 1.2066 printed amid the EUR/USD run at 1.3600 that failed at 1.3594, and as a result the price is consolidating in a 1.2075/85 band ahead of the European closes.
US TECHS: Commodities Outlook; Gold and Oil
Feb Comex highs and weekly trendlines converge at $699 as an objective for [gold], with still-higher levels attainable beyond there. The inverse relationship between gold and the dollar index bears watching, though, with long-term objectives nearing in the greenback as well as weekly/monthly momentum setups that are more in favor of it establishing a floor than continuing much lower.
With important lows set there in 2004, and the years 1991/92/95 before that, it is very important it get a grip soon. Turning attention back to gold, next weekly resistance is at $705; first monthly targets are near $718.
In [oil], charts are less clear as the market works to further its advance from mid-January floors. Measured retracements from last July's peak to the January lows shows the 38% level at $63.25 a pivotal zone, first as resistance and now more as support. 50% retracements at $66.66 have only been briefly exceeded on the way up, and momentum is a continuing issue here, with weekly readings still below neutral on May contracts, and barely above neutral on continuation charts.
With Trend Intensity recovering from its last trend signal and unlikely to be triggered soon, more range trading in the broad band of approximately $61.50-66.50 May is the most likely outcome.
With important lows set there in 2004, and the years 1991/92/95 before that, it is very important it get a grip soon. Turning attention back to gold, next weekly resistance is at $705; first monthly targets are near $718.
In [oil], charts are less clear as the market works to further its advance from mid-January floors. Measured retracements from last July's peak to the January lows shows the 38% level at $63.25 a pivotal zone, first as resistance and now more as support. 50% retracements at $66.66 have only been briefly exceeded on the way up, and momentum is a continuing issue here, with weekly readings still below neutral on May contracts, and barely above neutral on continuation charts.
With Trend Intensity recovering from its last trend signal and unlikely to be triggered soon, more range trading in the broad band of approximately $61.50-66.50 May is the most likely outcome.
US TECHS: S&P Holds Gap Break, Prior Highs a Focus
Yesterday's strength in June S&P closed the gap left from the decline in late February and is not pushing through there, which goes along with the thoughts that the market will be reaching the highs made in 2000 before a significant pullback develops. The recent spike in bearish sentiment is also a solid signal that this market can continue to push higher over the near term. It would take a close below trendline support at 1452 to damage the bullish bias.
Swiss Outlook (17th April 2007)
The Asian USD/CHF sell-off from 1.2151 continued into European action despite the impending Swiss data. Stops triggered in the break below 1.2125 (also in EUR/CHF in the push below 1.6420) ahead of the release and spot matched 1.2116 on the robust retail numbers (+4.5% Y/Y). The pair then consolidated for a period before the cable spike higher helped spur further CHF gains.
Bids into 1.2100 are now eyed and the price looks to stab lower. The recent SNB underpinning of the Franc has kept [EUR/CHF] working lower also and bids into 1.6400/05 are now in focus as the cross continues to slip. Technical resistance into 2.4190/4200 in [GBP/CHF] was soon undone as Sterling drove higher on the shock-CPI news.
2.4244 printed as stops fuelled the break into the 2.42's with offers into 2.4250 now stalling further strength. Looking ahead, US CPI data is now eyed by the broader markets to inject the broader directional bias (+0.6% M/M & +0.2% Core). Should the Dollar weaken then the stops below 1.2090 will be eyed while any US unit rebound will see USD/CHF target a return and retest of 1.2150.
Bids into 1.2100 are now eyed and the price looks to stab lower. The recent SNB underpinning of the Franc has kept [EUR/CHF] working lower also and bids into 1.6400/05 are now in focus as the cross continues to slip. Technical resistance into 2.4190/4200 in [GBP/CHF] was soon undone as Sterling drove higher on the shock-CPI news.
2.4244 printed as stops fuelled the break into the 2.42's with offers into 2.4250 now stalling further strength. Looking ahead, US CPI data is now eyed by the broader markets to inject the broader directional bias (+0.6% M/M & +0.2% Core). Should the Dollar weaken then the stops below 1.2090 will be eyed while any US unit rebound will see USD/CHF target a return and retest of 1.2150.
Sterling Outlook (17th April 2007)
Sterling soared by three-quarters-of-a-cent to new 15-year highs just north of 2.0000 following the 08:30GMT disclosure that annualized UK CPI spiked to 3.1% in March, from 2.8% in February. It was forecast unchanged. The CPI shock triggered an explanatory letter from BoE Governor Mervyn King to Chancellor Gordon Brown (www.bankofengland.co.uk). Brown's letter of response has been published on the UK Treasury website (www.hm-treasury.gov.uk).
A raft of exotic option exposure was located at 2.0000. Further option barriers are tipped at 2.0025, 2.0050, 2.0100 (Sep 1992 high), 2.0150 and 2.0200+. Corporate offers are touted circa 2.0000.
The UK CPI surprise makes next month's expected 25bp UK base rate rise to 5.5% a done deal (May 10). UK interest rate futures are pricing in another 25bp hike to 5.75% in Q3, with potential for a further 25bp increase beyond.
US March inflation figures will be unveiled at 12:30GMT, alongside March housing starts. Core CPI is forecast +0.2% m/m, +2.6% y/y. Industrial production and capacity utilization data ensues at 13:15GMT.
A raft of exotic option exposure was located at 2.0000. Further option barriers are tipped at 2.0025, 2.0050, 2.0100 (Sep 1992 high), 2.0150 and 2.0200+. Corporate offers are touted circa 2.0000.
The UK CPI surprise makes next month's expected 25bp UK base rate rise to 5.5% a done deal (May 10). UK interest rate futures are pricing in another 25bp hike to 5.75% in Q3, with potential for a further 25bp increase beyond.
US March inflation figures will be unveiled at 12:30GMT, alongside March housing starts. Core CPI is forecast +0.2% m/m, +2.6% y/y. Industrial production and capacity utilization data ensues at 13:15GMT.
Yen Outlook (17th April 2007)
JPY made up ground in the European morning session amid profit taking and bond related hedging. USD/JPY drifted lower after running into option related selling ahead of 120.00 and increased interest from lifers and custodial names reportedly booking bond related profits. A large EUR/JPY order exacerbated price action, with reports of one lifer selling EUR 1 billion.
The interest was reportedly a switch out of Eurobonds and into Japanese bonds, which incidentally came amid very strong demand at today's 30-yr JGB auction. USD/JPY traded down to 119.12 and EUR/JPY printed 161.32. Both pairs were supported amid good Asian name demand. The former saw importer activity as well as investor demand and EUR/JPY saw good investment trust interest.
A number of accounts are believed to be positioning themselves for Friday's Y100 billion Toushin and next week's Y600 billion in new launches. Today's European afternoon focus will shift to the US CPI release. The market is sensitive to any signs of stagflation and a strong reading coupled with fears of below trend growth in Q1 would reinforce the broadly soft dollar trend.
The interest was reportedly a switch out of Eurobonds and into Japanese bonds, which incidentally came amid very strong demand at today's 30-yr JGB auction. USD/JPY traded down to 119.12 and EUR/JPY printed 161.32. Both pairs were supported amid good Asian name demand. The former saw importer activity as well as investor demand and EUR/JPY saw good investment trust interest.
A number of accounts are believed to be positioning themselves for Friday's Y100 billion Toushin and next week's Y600 billion in new launches. Today's European afternoon focus will shift to the US CPI release. The market is sensitive to any signs of stagflation and a strong reading coupled with fears of below trend growth in Q1 would reinforce the broadly soft dollar trend.
Euro Outlook (17th April 2007)
Into European trading and [EUR/USD] had caved itself a 1.3525/50 groove. Offers into 1.3545/50 helped reject the initial tests of the topside and ahead of the German and European data and spot worked lower. Bids into 1.3530/35 propped but EUR/GBP sales weighed after Sterling rose on the unexpected CPI headline. Cable buying offset the cross weakness but EUR/USD was forced to continue range-trading after the price failed to hold the initial break above 1.3550.
1.3552 printed but despite the above expectation ZEW data (16.5 Vs 10.0 F'cast) the pair has since eased back sub-1.3550. Looking ahead, dealers look to the 12:30 GMT release of the latest US CPI to add the next directional bias. March data is expected at +0.6% M/M with the core up 0.2%. Should the data diverge from the consensus then central bank supply up at 1.3570/75 will be eyed while on the downside buyers trail to 1.3500 with stops noted below here.
Also set for release at 12:30 GMT are Housing Starts and Real Earnings (both March). Plosser is also scheduled to speak with March Industrial Production data following at 13:15 GMT.
1.3552 printed but despite the above expectation ZEW data (16.5 Vs 10.0 F'cast) the pair has since eased back sub-1.3550. Looking ahead, dealers look to the 12:30 GMT release of the latest US CPI to add the next directional bias. March data is expected at +0.6% M/M with the core up 0.2%. Should the data diverge from the consensus then central bank supply up at 1.3570/75 will be eyed while on the downside buyers trail to 1.3500 with stops noted below here.
Also set for release at 12:30 GMT are Housing Starts and Real Earnings (both March). Plosser is also scheduled to speak with March Industrial Production data following at 13:15 GMT.
Friday, April 13, 2007
EUR/USD: Stops Above 1.3510, Mix Of Stops/Sellers 1.3520/50
There are stops in the EUR/USD above 1.3510 with a mix of sellers and stops layered between 1.3520/50. Traders are eyeing the USD index, which is trading around 82.35 just ahead of major support at 82.25. The USD index broke below trend-line support at 82.55 during the US session and a clear break below 82.25 would confirm that the USD is set to leg lower. Hourly support for the EUR/USD has formed around 1.3470 and a break below that level would temporarily relieve the upward pressure and target a drift towards 1.3440/55. The EUR/USD trades 1.3486/91.
EUR/USD: Rising Bond Yields Prompt Dip
EUR/USD is succumbing to some profit taking as US bond yields edge up in the wake of the rise inflation expectations as captured by the University of Michigan survey. A run to 161.00 (and through) is helping limit dips though as prices pullback to 1.3530 support. Bids are eyed in the 1.3515/20 area near-term, dealers report.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] has firmed to the upper end of its rising wedge pattern, defined on the top side by a trendline drawn from Mar 9 and Apr 10 highs. That trendline comes in a shade below $690 today. The wedge rises by just under a dollar each day. With the new high for the week, the market is just above weekly targets and a shade below monthly objectives in the $689.50-692.50 zone.
The $700 region was not broken past in late Feb after three tries, which culminated in a near-$60 break. Momentum should be hard to maintain, and a probable bearish divergence pattern is in the making currently, with buying off the lows not as strong as that which led to late Feb peaks. The rising wedge and approach of monthly technical targets makes us reluctant to chase this market, expecting a reaction.
With mid-month nearly here, inside month structure is in place for [oil]. An unchanged close today is needed to retain weekly bull status on trading models; monthlies turned neutral (from bearish) at the end of March. Daily trends are also neutral. Even hourly momentum readings are neutral, having recovered from extreme oversold levels that bottomed out on Tuesday.
Good intraday supports are in the $62.50-63.00 region today. With prices near midrange levels of recent trading, the most likely near-term pattern is for additional consolidation. Elliott wave counts also favor additional non-trending action.
The $700 region was not broken past in late Feb after three tries, which culminated in a near-$60 break. Momentum should be hard to maintain, and a probable bearish divergence pattern is in the making currently, with buying off the lows not as strong as that which led to late Feb peaks. The rising wedge and approach of monthly technical targets makes us reluctant to chase this market, expecting a reaction.
With mid-month nearly here, inside month structure is in place for [oil]. An unchanged close today is needed to retain weekly bull status on trading models; monthlies turned neutral (from bearish) at the end of March. Daily trends are also neutral. Even hourly momentum readings are neutral, having recovered from extreme oversold levels that bottomed out on Tuesday.
Good intraday supports are in the $62.50-63.00 region today. With prices near midrange levels of recent trading, the most likely near-term pattern is for additional consolidation. Elliott wave counts also favor additional non-trending action.
USD/JPY: Unable To Overcome 118.85 Offers
USD/JPY pushed up to 118.83 despite the weaker than expected confidence number from the US. The Michigan survey showed 85.3 vs 88.4, which was in contrast to rumours of a strong release. However, the dollar was not impacted in an adverse way, with general JPY weakness underpinning USD/JPY.
Standing offers left since late on in the Asian session have managed to hold, yet the bias is clearly back on the topside as speculative accounts looks to pressurise stops above 119.00. It looks as if the JPY crosses will drive USD/JPY into the weekend, with EUR/JPY a short distance from barriers at 161.00.
Standing offers left since late on in the Asian session have managed to hold, yet the bias is clearly back on the topside as speculative accounts looks to pressurise stops above 119.00. It looks as if the JPY crosses will drive USD/JPY into the weekend, with EUR/JPY a short distance from barriers at 161.00.
Swiss Outlook (13th April 2007)
Fundamentals have supported the Franc fight-back intraday and the unit has not disappointed with gains against both the Dollar and the Euro. Today a large Swiss outfit raised their forecasts for growth in the mountain economy in 2007 and 08. The name in question now looks for an annual growth rate of 2.3% in 2007 (from 1.9% previously), while 08 is forecast at a "still fairly impressive" 2.0%.
Rumors yesterday surfaced that the G7 might look at the Franc instead of the Yen but foreign currency investors still interpret the positive signals from Europe and Switzerland as a sign that a good funding environment remains. Therefore, further EUR/CHF gains remain a very real prospect and the 1.6500 options loom in the cross as a bull target. However, the cross has broken back below 1.6370 support and is now looking to fill 1.6350 bids and remove the stops noted below.
Elsewhere, a prime US investment house has today revised their forecasts for EUR/CHF. They now see the cross trading at 1.65, 1.65 and 1.62 in the 3, 6 and 12 months respectively. This contrasts to the Swiss forecast of 1.58 in H2 07 and our IFR forecasts of 1.60 by year-end.
Rumors yesterday surfaced that the G7 might look at the Franc instead of the Yen but foreign currency investors still interpret the positive signals from Europe and Switzerland as a sign that a good funding environment remains. Therefore, further EUR/CHF gains remain a very real prospect and the 1.6500 options loom in the cross as a bull target. However, the cross has broken back below 1.6370 support and is now looking to fill 1.6350 bids and remove the stops noted below.
Elsewhere, a prime US investment house has today revised their forecasts for EUR/CHF. They now see the cross trading at 1.65, 1.65 and 1.62 in the 3, 6 and 12 months respectively. This contrasts to the Swiss forecast of 1.58 in H2 07 and our IFR forecasts of 1.60 by year-end.
Sterling Outlook (13th April 2007)
Tripped stops helped propel cable to three-month highs just shy of 1.9870 in early European trade, as the USD came under across-the-board selling pressure. 1.9840 and 1.9850 offers were absorbed en route to those highs. 1.9840/50 is now pullback support window. 1.9837 was today's Asia high. Touted offers at 1.9880 and 1.9900 are bull targets north of 1.9870.
Above-figure obstacles include 1.9917 (Jan 23, 15-year peak), 1.9975 and 2.0000. A raft of exotic option exposure is located at, and above, 2.0000. US March producer price inflation and US February trade data is due at 12:30GMT. Core PPI is forecast +0.2% m/m. Trade deficit forecast: $60.0bn. April's Michigan Sentiment index ensues at 14:00GMT. Forecast: 87.5.
BoE Deputy Governor John Gieve is slated to speak at 11:45GMT. Gieve voted in favour of January's 25bp UK base hike to 5.25%. Minutes from this month's MPC meeting will be published next Wednesday (Apr 18). UK March inflation figures will be revealed next Tuesday. Annualized UK CPI unexpectedly rose to 2.8% in February, having fallen to 2.7% in January.
Above-figure obstacles include 1.9917 (Jan 23, 15-year peak), 1.9975 and 2.0000. A raft of exotic option exposure is located at, and above, 2.0000. US March producer price inflation and US February trade data is due at 12:30GMT. Core PPI is forecast +0.2% m/m. Trade deficit forecast: $60.0bn. April's Michigan Sentiment index ensues at 14:00GMT. Forecast: 87.5.
BoE Deputy Governor John Gieve is slated to speak at 11:45GMT. Gieve voted in favour of January's 25bp UK base hike to 5.25%. Minutes from this month's MPC meeting will be published next Wednesday (Apr 18). UK March inflation figures will be revealed next Tuesday. Annualized UK CPI unexpectedly rose to 2.8% in February, having fallen to 2.7% in January.
Yen Outlook (13th April 2007)
The European session saw speculative accounts and leverage funds reduce their short-JPY exposure. Carry trade concerns and US-China relations were flagged as risks as we enter the G7 meeting. USD/JPY filled in 118.50 bids and triggered stops below 118.40 to print a 118.22 low. The downside was underpinned by interest from life insurers to buy. Bids were reportedly heavy in the 118.00-20 zone offsetting the profit taking by speculative accounts.
EUR/JPY was underpinned initially by EUR/USD strength but eventually headed lower due to the broad JPY moves. The pair broke back below 160.00, yet found support amid investor demand for European bonds and reports of some players establishing fresh short JPY positions amid the pullback into 160.00. The afternoon session will take its lead from US PPI data.
The stagflation story has been growing amid inflationary pressures and the slowdown in US growth. The market is focused on growth though and whether the US can negotiate a soft landing. An inflationary build up would restrict the Fed's hand and could ultimately undermine dollar sentiment.
EUR/JPY was underpinned initially by EUR/USD strength but eventually headed lower due to the broad JPY moves. The pair broke back below 160.00, yet found support amid investor demand for European bonds and reports of some players establishing fresh short JPY positions amid the pullback into 160.00. The afternoon session will take its lead from US PPI data.
The stagflation story has been growing amid inflationary pressures and the slowdown in US growth. The market is focused on growth though and whether the US can negotiate a soft landing. An inflationary build up would restrict the Fed's hand and could ultimately undermine dollar sentiment.
Euro Outlook (13th April 2007)
Ahead of the weekend G7 meeting and the latest UBS risk aversion index has continued to tick south. Hitting -0.41, from -0.30 yesterday, the data highlights that risk appetite continues to increase. As a result so-called "growth" currencies are expected to remain bid at the expense of lower yielding units like the CHF and the Yen. Into European trading and EUR/USD remained supported as the Euro continued to be bought on the crosses.
Option barriers at 1.3550 have been targeted by bulls but thus far the combination of technical and gamma related supply has capped the move higher and 1.3546 marks the session and intraday highs. More barriers are seen into the 1.36 mark should the price break higher in NorAm trading while only a break below 1.3450 will take the pressure off the topside.
Looking ahead, a deluge of US data is set for release before the weekly close. 12:30 GMT sees the release of US February International Trade data and March PPI while at 14:00 GMT the latest Michigan release will keep the focus on the US economy and the potential for an impending recession.
Option barriers at 1.3550 have been targeted by bulls but thus far the combination of technical and gamma related supply has capped the move higher and 1.3546 marks the session and intraday highs. More barriers are seen into the 1.36 mark should the price break higher in NorAm trading while only a break below 1.3450 will take the pressure off the topside.
Looking ahead, a deluge of US data is set for release before the weekly close. 12:30 GMT sees the release of US February International Trade data and March PPI while at 14:00 GMT the latest Michigan release will keep the focus on the US economy and the potential for an impending recession.
Thursday, April 12, 2007
USD/JPY: Bids Remain At 118.75, Stops Eyed Below
The USD/JPY traded to a low of 118.80 in the morning sell-off but has now stabilized. Stops are eyed under 118.70/75 but some now see USD/JPY consolidating after the move lower today, with the retreat in USD/JPY still eyed as part of the recent range.
Also seen adding to JPY gains today was higher-than-expected corporate goods prices released last night at 2.0% for the year against expectations of a 1.9%. Of note too is the speculation from Japanese fund managers, heard in the JGB market overnight, that they fear that Japan will again be pressured to raise rates again at the G-7, in order to normalize its monetary policy.
Though Japanese officials have denied that any rate move was due to outside pressure and BOJ officials have denied the rate rise was due to pressure from the government, the Japanese fund managers still suspect more pressure to raise rates for the May 16-17 BOJ meeting in order to quash the continued speculative flow of funds into carry trades. USD/JPY is currently at 118.98/02.
Also seen adding to JPY gains today was higher-than-expected corporate goods prices released last night at 2.0% for the year against expectations of a 1.9%. Of note too is the speculation from Japanese fund managers, heard in the JGB market overnight, that they fear that Japan will again be pressured to raise rates again at the G-7, in order to normalize its monetary policy.
Though Japanese officials have denied that any rate move was due to outside pressure and BOJ officials have denied the rate rise was due to pressure from the government, the Japanese fund managers still suspect more pressure to raise rates for the May 16-17 BOJ meeting in order to quash the continued speculative flow of funds into carry trades. USD/JPY is currently at 118.98/02.
GBP/USD: Stops Above 1.9800 Tripped, Offers at 1.9820
Tripped stops above 1.9800 helped inflate cable to a new intra-day high of 1.9811, as EUR/USD scaled a 27-month peak just north of 1.3500. Sterling sell interest is noted at 1.982,a couple of pips above yesterday's eight-day top, and 1.9825, a couple of pips above last week"s 10-week peak (Apr 3).
1.9790 (early Europe high) is now a support point. Lower props include 1.9767 (today's Asian session top) and 1.9734 (yesterday's post-FOMC minutes low). Looking ahead to tomorrow: BoE Deputy Governor John Gieve is slated to speak in the Midlands at 11:45GMT. Gieve voted in favour of January's 25bp UK base rate hike to 5.25%.
He then voted for no rate change in February and March. Minutes from this month's MPC meeting will be published next Wednesday (Apr 18). The next MPC meeting is on May 9/10.
1.9790 (early Europe high) is now a support point. Lower props include 1.9767 (today's Asian session top) and 1.9734 (yesterday's post-FOMC minutes low). Looking ahead to tomorrow: BoE Deputy Governor John Gieve is slated to speak in the Midlands at 11:45GMT. Gieve voted in favour of January's 25bp UK base rate hike to 5.25%.
He then voted for no rate change in February and March. Minutes from this month's MPC meeting will be published next Wednesday (Apr 18). The next MPC meeting is on May 9/10.
EUR/USD: Barriers Wiped Away with Surprising Ease
EUR/USD overcame 1.3500 like it was nothing special, but soon dipped back below that level, trading now at 1.3489. Seconds before the rally, dealers surmised that 1.3500 was going to be a tough nut to crack based on trading in short-dated options which implied that the 1.3500 were quite large indeed.
Within about 10-seconds, the barriers were breezed through with a quick spike to the 1.3504 level noted. 1.3530 is modest resistance on rallies with 1.3580 the next significant high, a top from January 2005. 1.3475/80 bids are eyed on dips near-term.
Within about 10-seconds, the barriers were breezed through with a quick spike to the 1.3504 level noted. 1.3530 is modest resistance on rallies with 1.3580 the next significant high, a top from January 2005. 1.3475/80 bids are eyed on dips near-term.
Swiss Outlook (12th April 2007)
Into European trading and cross volatility kept USD/CHF looking elsewhere. Support into 1.2200 was absorbed and trading edged back towards 1.2180 bids but the failure of EUR/USD to break above 1.3480 left the price looking to bounce. Offers remain in play at 1.2215 while the topside needs a break above 1.2245/50 before opening further. However, it has been EUR/CHF that has been the center of attention.
The cross printed a fresh all-time high (at 1.6453) in early Asian trading as the option barriers at 1.6400 and 1.6450 were removed by solid buying from European names. However, the highs were soon rejected and the cross spent the European morning consolidating the drop towards 1.64 support. The pair has now moved 500-pips in 5-Weeks but 1.6500 is seen as the level where the SNB may draw the line.
US data is set for release into NorAm trading with Import and Export numbers for March set for release at 12:30 GMT. Economists in a recent survey forecast a 0.8% rise in imports and a 0.4% increase in exports. Following this March SpendingPulse retail sales data is set for release at 15:00 GMT.
The cross printed a fresh all-time high (at 1.6453) in early Asian trading as the option barriers at 1.6400 and 1.6450 were removed by solid buying from European names. However, the highs were soon rejected and the cross spent the European morning consolidating the drop towards 1.64 support. The pair has now moved 500-pips in 5-Weeks but 1.6500 is seen as the level where the SNB may draw the line.
US data is set for release into NorAm trading with Import and Export numbers for March set for release at 12:30 GMT. Economists in a recent survey forecast a 0.8% rise in imports and a 0.4% increase in exports. Following this March SpendingPulse retail sales data is set for release at 15:00 GMT.
Sterling Outlook (12th April 2007)
Cable rallied to 1.9790 offers in early European trade, as the continent absorbed the 00:01BST disclosure of March's better-than-expected RICS UK house price balance. This rose to +25.5, from +24.8 in February. A fall to +20.0 was expected. The strong number underpins the expectation that the BoE MPC will hike the UK base rate by another 25bp to 5.5% next month (May 10).
Eastern European demand for GBP helped base cable pre-1.9734 (yesterday's post-FOMC minutes NY session low), following its retreat from 1.9790. February's larger-than-expected UK trade deficit contributed to that retreat. Sub-1.9734 support points include 1.9724 (today's Asian session base) and 1.9711 (Wednesday's Asian session floor). Further offers are touted at 1.9800, with some stops tipped above the figure.
Additional sell interest is tipped at 1.9820 a couple of pips above yesterday's eight-day high. US weekly jobless claims, and March import prices, will be unveiled at 12:30GMT. Jobless claims forecast: 320k. Import prices forecast: +0.8% m/m. A two-day G7 meeting begins in Washington tomorrow.
Eastern European demand for GBP helped base cable pre-1.9734 (yesterday's post-FOMC minutes NY session low), following its retreat from 1.9790. February's larger-than-expected UK trade deficit contributed to that retreat. Sub-1.9734 support points include 1.9724 (today's Asian session base) and 1.9711 (Wednesday's Asian session floor). Further offers are touted at 1.9800, with some stops tipped above the figure.
Additional sell interest is tipped at 1.9820 a couple of pips above yesterday's eight-day high. US weekly jobless claims, and March import prices, will be unveiled at 12:30GMT. Jobless claims forecast: 320k. Import prices forecast: +0.8% m/m. A two-day G7 meeting begins in Washington tomorrow.
Yen Outlook (12th April 2007)
JPY remains under pressure. USD/JPY did not deviate much from recent levels and remains near yesterday's high of 119.55. It basically traded between 119.23-51 with the focus elsewhere. The topside was capped by exporter offers and reports of commercial interest from sovereign names. The JPY crosses remained buoyant, helping to support USD/JPY. EUR/JPY in particular was a standout, surging to a fresh record high of 160.80/85 in Asia.
Expectations of hawkish comments from ECB's Trichet and the relative lack of concern over EUR strength on the part of the IMF and German exporters yesterday has helped EUR sentiment and pushed the cross higher. A number of traders in Tokyo cited a possible trade up to the 162.40 level, a synthetic high which equates with the DEM/JPY high of 83.10 or so seen in October "98.
The topside saw profit taking from bond related positions and the usual interest from exporters and option names. The market is largely ignoring the forthcoming G7 meeting. This should encourage continued speculative activity, with the near-term direction dependent on the performance in the high yielders.
Expectations of hawkish comments from ECB's Trichet and the relative lack of concern over EUR strength on the part of the IMF and German exporters yesterday has helped EUR sentiment and pushed the cross higher. A number of traders in Tokyo cited a possible trade up to the 162.40 level, a synthetic high which equates with the DEM/JPY high of 83.10 or so seen in October "98.
The topside saw profit taking from bond related positions and the usual interest from exporters and option names. The market is largely ignoring the forthcoming G7 meeting. This should encourage continued speculative activity, with the near-term direction dependent on the performance in the high yielders.
Euro Outlook (12th April 2007)
European trading saw EUR/USD supported after the overnight fresh all-time highs in EUR/JPY and EUR/CHF. Offers into 1.3470/80 were tested but stood firm to force a pre-EZ data pullback to 1.3440 support. Looking ahead, the impending ECB verdict (11:45 GMT) and the 14:00 GMT expiry of more 1.3500 KO options should weigh on the price intraday.
Further protection of the above options is expected and the European Central Bank is forecast to leave rates on hold at 3.75%. However, if the ECB President holds a hawkish tome at his accompanying 12:30 GMT conference then spot could bounce back for a re-test of the official sales into 1.3480. Yet political pressure is mounting for an halt to the hikes and Trichet may therefore err on the side of caution and rein-in the recent hawkish ECB tone at the press conference.
US data is set for release into NorAm trading with Import and Export numbers for March set for release at 12:30 GMT. Economists in a recent survey forecast a 0.8% rise in imports and a 0.4% increase in exports. Following this March SpendingPulse retail sales data is set for release at 15:00 GMT.
Further protection of the above options is expected and the European Central Bank is forecast to leave rates on hold at 3.75%. However, if the ECB President holds a hawkish tome at his accompanying 12:30 GMT conference then spot could bounce back for a re-test of the official sales into 1.3480. Yet political pressure is mounting for an halt to the hikes and Trichet may therefore err on the side of caution and rein-in the recent hawkish ECB tone at the press conference.
US data is set for release into NorAm trading with Import and Export numbers for March set for release at 12:30 GMT. Economists in a recent survey forecast a 0.8% rise in imports and a 0.4% increase in exports. Following this March SpendingPulse retail sales data is set for release at 15:00 GMT.
USD/CHF: European Squaring Over Swissy Recedes Into Tight Range
With the European day traders having bowed out of the market, leaving the London lads the last to go, USD/CHF receded into a mind-numbing 1.2180-90 stultifying range, or as some traders are describing it "quote", as they do not feel ten points constitutes a range.
Some leveraged account traders are desperately trying to stir the pot, sending around reports of the Al Qaeda "ownership" of the Algeria bombing as pressuring gasoline, stocks and emerging market currencies, however energy traders attribute the moves there to the DOE report of larger than anticipated gasoline inventory withdrawals.
Then there were stories of changes in Turkish real estate ownership rules allowing foreigners more access, but no follow through there either, so it seems attempts to re-invigorate the market are falling on deaf ears. The recent "surge" to 1.2193 has a few hopeful adherents, but older hands seem skeptical.
Some leveraged account traders are desperately trying to stir the pot, sending around reports of the Al Qaeda "ownership" of the Algeria bombing as pressuring gasoline, stocks and emerging market currencies, however energy traders attribute the moves there to the DOE report of larger than anticipated gasoline inventory withdrawals.
Then there were stories of changes in Turkish real estate ownership rules allowing foreigners more access, but no follow through there either, so it seems attempts to re-invigorate the market are falling on deaf ears. The recent "surge" to 1.2193 has a few hopeful adherents, but older hands seem skeptical.
USD/JPY: Japan Rates Seen Steady Through August - Survey
USD/JPY has garnered strong support from a number of factors today including the support from the IMF for Japan's low interest rates. Also supporting USD/JPY were the Feb machinery orders released in Japan last night which showed a decline of 5.2%, further supporting expectations that Japanese rates will remain steady through at least August.
A survey released last night from Japan's EPA shows that many of the Japanese economists surveyed, nine out of 34, do not expect to the BOJ to lift rates until September, though eight forecast an August rise and seven forecast a rate hike in October. The view that the rates will remain steady through the next four months continues to favor JPY selling on carry trades. USD/JPY is currently at 119.36 after pulling back from 119.53 highs this morning.
A survey released last night from Japan's EPA shows that many of the Japanese economists surveyed, nine out of 34, do not expect to the BOJ to lift rates until September, though eight forecast an August rise and seven forecast a rate hike in October. The view that the rates will remain steady through the next four months continues to favor JPY selling on carry trades. USD/JPY is currently at 119.36 after pulling back from 119.53 highs this morning.
GBP/USD: Longs Lightening Up on Rallies
Cable is seeing some profit-taking on rallies late in London as dealers take advantage of some of the remaining euphoria over the potential for UK tax reform which will make repatriation of foreign profits tax free. While such a move would be an unabashed positive for the pound, the idea has not even made its way into legislation yet, much less law, so it is very premature to take a position on that eventuality. Upbeat BRC data and an upgraded IMF GDP forecast for the UK are helping underpin the pound this morning as well. Sellers are eyed in the 1.9790/00 area and again toward 1.9820/25.
Wednesday, April 11, 2007
USD/JPY: Asian Selling Caps USD/JPY Gains
Two large Asian sovereign sellers capped USD/JPY at 119.53 triggering a pullback to 119.27 on USD/JPY but dealers note that the fall in US stocks, with the DJIA down 80 pts, and the retreat in US bond yields have also helped cap gains. The Asian offers are still eyed above 119.50 along with option-related selling on the approach of 120.00 that will continue to hamper gains.
Dealings have settled down with the market now focused on the FOMC meeting. JPY crosses remain bid overall with the comments from the IMF that there was no need for further action to address carry trades seen offering support to the crosses. Ironically, traders note that only yesterday, in the IMF Global Financial Stability Report, the IMF warned that a volatility shock could lead to the rapid unwinding of carry trades.
Dealings have settled down with the market now focused on the FOMC meeting. JPY crosses remain bid overall with the comments from the IMF that there was no need for further action to address carry trades seen offering support to the crosses. Ironically, traders note that only yesterday, in the IMF Global Financial Stability Report, the IMF warned that a volatility shock could lead to the rapid unwinding of carry trades.
EUR/USD: Fixing Demand Helps Push Prices to Fresh Intraday High
EUR/USD pushed through the 1.3435 area in the wake of the 15:00 GMT fixing, boosted by solid demand for carry trades after the IMF's comments on benign conditions for carry trades.
Follow-through has been limited once again, only to 1.3440 before easing again. Dealers see prices holding steady through the FOMC minutes at a minimum and perhaps all the way through to the ECB press conference tomorrow. EUR/USD trades at 1.3434.
Follow-through has been limited once again, only to 1.3440 before easing again. Dealers see prices holding steady through the FOMC minutes at a minimum and perhaps all the way through to the ECB press conference tomorrow. EUR/USD trades at 1.3434.
Swiss Outlook (11th April 2007)
European trading has seen offers in USD/CHF trailing back to 1.22 look to cap. One Swiss player tips some option related supply into the highs but as yet this has not prompted any 1.2200 expiry talk. 1.2197 sits as the session high but spot is back trading in the high 1.2180's. Elsewhere, EUR/CHF is encountering offers in the 1.6360's and the cross is yet to break into the 1.6370's.
Should trading break back above 1.6370 then a retracement back to the all-time highs at 1.6292 will be eyed. This could force USD/CHF into the 1.22's more sellers are seen into 1.2215/25. [GBP/CHF] traded as high as 2.4135 on the back of the Sterling positive repatriation news but the price is now consolidating near the high.
Looking ahead, before the 18:00 GMT double of the FOMC Minutes, from March 20th/21st, and the US Budget release, also for March, the market has the Lacker and Bernanke comments to negotiate (due at 16:45 and 17:00 GMT respectively). There is little due for release on the early run so the status-quo looks set to continue with only a break below 1.2145 altering the equilibrium.
Should trading break back above 1.6370 then a retracement back to the all-time highs at 1.6292 will be eyed. This could force USD/CHF into the 1.22's more sellers are seen into 1.2215/25. [GBP/CHF] traded as high as 2.4135 on the back of the Sterling positive repatriation news but the price is now consolidating near the high.
Looking ahead, before the 18:00 GMT double of the FOMC Minutes, from March 20th/21st, and the US Budget release, also for March, the market has the Lacker and Bernanke comments to negotiate (due at 16:45 and 17:00 GMT respectively). There is little due for release on the early run so the status-quo looks set to continue with only a break below 1.2145 altering the equilibrium.
Sterling Outlook (11th April 2007)
Sterling rallied to early Europe eight-day highs within a tenth-of-a-cent of 1.9823 (Apr 3, 10-week peak) as the continent absorbed the FT-reported news of a UK Treasury proposal to allow British-based multinationals to repatriate billions of pounds of foreign profits tax-free to the UK. The same news had buoyed GBP/USD to an Asian session top of 1.9780.
A UK Treasury source says any UK foreign tax change would be "revenue neutral" (Reuters). Cable has elicited support ahead of 1.9760 following its retreat from its early Europe highs. Stops above 1.9760 were tripped in Asia today. A "substantial" 1.9850 exotic option barrier is slated to roll off at today's 14:00GMT NY cut. Sterling last traded at 1.9850 on January 23, a day on which it scaled a 15-year peak of 1.9917.
A break of 1.9850 is seen increasing the risk of a test of 2.0000, a level at which there is further exotic exposure. Today's key US event risk is the 18:00GMT publication of minutes from the March 20/21 FOMC meeting. Six out of 10 Americans expect a recession within a year, according to a Bloomberg/LA Times poll.
A UK Treasury source says any UK foreign tax change would be "revenue neutral" (Reuters). Cable has elicited support ahead of 1.9760 following its retreat from its early Europe highs. Stops above 1.9760 were tripped in Asia today. A "substantial" 1.9850 exotic option barrier is slated to roll off at today's 14:00GMT NY cut. Sterling last traded at 1.9850 on January 23, a day on which it scaled a 15-year peak of 1.9917.
A break of 1.9850 is seen increasing the risk of a test of 2.0000, a level at which there is further exotic exposure. Today's key US event risk is the 18:00GMT publication of minutes from the March 20/21 FOMC meeting. Six out of 10 Americans expect a recession within a year, according to a Bloomberg/LA Times poll.
Yen Outlook (11th April 2007)
JPY remained on the softer side, yet weakness was clipped by profit taking via USD/JPY and the JPY crosses. A combination of Japanese exporter sales and profit-taking by speculative accounts was noted. Any pullback from the highs in EUR/JPY and USD/JPY was short lived, with decent support noted amid light Japanese investor demand and general leverage fund interest.
EUR/JPY traded up to a fresh record high of 160.19 and met some light sovereign name selling and option protective interest amid a 160.20 option trigger and plain vanilla strikes. GBP/JPY traded on a supportive footing, holding onto the gains made in late Asia amid the FT report of possible HIA flows back to the UK down the road. The general flight to yield underpinned both AUD/JPY and NZD/JPY despite some profit taking and bond related selling.
There were reports of currency related profit taking in Australian and European bonds. JPY losses may well be tempered going forward, with the weekend G7 meeting expected to increase risk aversion despite the lofty levels in the JPY crosses. Profit taking and risk reduction amid fears of JPY reprisals may lead price action.
EUR/JPY traded up to a fresh record high of 160.19 and met some light sovereign name selling and option protective interest amid a 160.20 option trigger and plain vanilla strikes. GBP/JPY traded on a supportive footing, holding onto the gains made in late Asia amid the FT report of possible HIA flows back to the UK down the road. The general flight to yield underpinned both AUD/JPY and NZD/JPY despite some profit taking and bond related selling.
There were reports of currency related profit taking in Australian and European bonds. JPY losses may well be tempered going forward, with the weekend G7 meeting expected to increase risk aversion despite the lofty levels in the JPY crosses. Profit taking and risk reduction amid fears of JPY reprisals may lead price action.
Euro Outlook (11th April 2007)
Little has changed over the past 24-hours and EUR/USD still finds itself trapped by fundamentals in the short-term and options in the medium-term. Spot spent the European morning drifting between 1.3415 and 1.3435, echoing the Asian session, as little fresh interest was generated. The lack of data helped this sideways action with bids into 1.3400 still likely to prop on dips with stops only noted below the figure.
On the options front, having erased the 1.3450 barriers yesterday the 1.3500 structures are now being targeted. However, the failure to sustain the drive to 1.3457 yesterday has seen the topside looking equally thick intraday. Looking ahead, Asian central bank supply may have fortified the 1.3460 area but official event-risk is seen on both sides.
The 18:00 GMT release of the latest FOMC Minutes will define the pre-ECB momentum, with the verdict tomorrow not expected to generate as much support for the EUR as the accompanying Trichet press conference. Ahead of the Fed Minutes and Budget data both Bernanke and Lacker are also scheduled to speak.
On the options front, having erased the 1.3450 barriers yesterday the 1.3500 structures are now being targeted. However, the failure to sustain the drive to 1.3457 yesterday has seen the topside looking equally thick intraday. Looking ahead, Asian central bank supply may have fortified the 1.3460 area but official event-risk is seen on both sides.
The 18:00 GMT release of the latest FOMC Minutes will define the pre-ECB momentum, with the verdict tomorrow not expected to generate as much support for the EUR as the accompanying Trichet press conference. Ahead of the Fed Minutes and Budget data both Bernanke and Lacker are also scheduled to speak.
Tuesday, April 10, 2007
EUR/USD: Dips Limited as Mortgage Focus Intensifies
EUR/USD dipped to 1.3425 but has since bounced back with soft US consumer confidence data and renewed focus on the subprime mortgage market helping undermine the USD. Those two factors are likely working hand in hand as the relentless focus on mortgage woes has Joe Six-Pack feeling a bit less rosy.
Protection of 1.3450 barriers remains in play, helping keep EUR/USD south of 1.3440. Central bank sales were spotted near the highs earlier. The Fed's Mishkin says that the Fed should consider asset prices and exchange rates in its calculus, but goes on to say that they should not focus too much on exchange rates.
One factor helping prop the EUR overnight was a Bloomberg story saying both the US and EU were pleased with the present EUR/USD rate. The ECB is helped on the inflation front by the strong EUR while US exports get a lift from USD weakness. EUR/USD trades at 1.3432.
Protection of 1.3450 barriers remains in play, helping keep EUR/USD south of 1.3440. Central bank sales were spotted near the highs earlier. The Fed's Mishkin says that the Fed should consider asset prices and exchange rates in its calculus, but goes on to say that they should not focus too much on exchange rates.
One factor helping prop the EUR overnight was a Bloomberg story saying both the US and EU were pleased with the present EUR/USD rate. The ECB is helped on the inflation front by the strong EUR while US exports get a lift from USD weakness. EUR/USD trades at 1.3432.
USD/CHF: Working Lower - Mishkin On Inflation
USD/CHF continues to work lower with some talking of short-term accounts looking to book profits on intraday shorts on any break into the 1.2150's. 1.2160 marks the current session and intraday low with EUR/CHF consolidating the break under 1.6350. Should the cross look to work back towards 1.6335 then expect stabs at 1.2150 support to prompt such profit-taking.
Elsewhere, the Fed's Mishkin notes that "unforeseen economic shocks can force a temporary trade off between employment and inflation". Dealers have given his speech mixed reviews but most lean towards the "nothing new" camp after the comment that the Fed had effectively anchored US inflation by taking "policy actions that have kept price rises low and stable".
Elsewhere, the Fed's Mishkin notes that "unforeseen economic shocks can force a temporary trade off between employment and inflation". Dealers have given his speech mixed reviews but most lean towards the "nothing new" camp after the comment that the Fed had effectively anchored US inflation by taking "policy actions that have kept price rises low and stable".
USD/JPY: Hovers Over 119.00 Ahead Of NY Options Cut
USD/JPY hovers over the 119.00 handle ahead of the NY options cut. In the absence of larger flows, options name are driving price action amid reports of gamma related spot flows. Good size strikes have changed hands at this level over the last few sessions and this has left spot in a very narrow trading range since the European open. This interest has reduced the pace of spot movement and may well continue in tomorrow's session given the open interest that is confirmed at the Tokyo and the NY cut. Bids remain at 118.75/80 and standing offers come in at 119.35 up to 119.50.
Swiss Outlook (10th April 2007)
In European action the Franc reacted little to the early news that the unemployment rate had fallen to a 4 1/2 year low. The March data, released earlier by SECO, hit a seasonally adjusted unemployment rate of 2.9%, the lowest since October 2002. USD/CHF continued to pivot 1.22 with 1.2195/2210 the early comfort-zone despite the overnight EUR/CHF rally to a new all-time high at 1.6392.
Options at 1.6400 were eyed but the cross failed to test such levels. Systematic and high frequency sellers sold into the highs in USD/CHF and this combined with the EUR/CHF failure left the downside in view into the NorAm open. EUR/CHF triggered stops amid the fall below 1.6370 support and bids into 1.6350/55 are now attempting to prop while USD/CHF notes stops below 1.2185.
Looking ahead, there is significant US data on the calendar intraday thus the tight ranges could be set to persist with only a break outside of 1.2150/2250 adding short-term momentum. Elsewhere, the Swiss Federal Treasury announced today it was to reopen its 2.0 percent bond maturing in 2016 amid the latest tender.
Options at 1.6400 were eyed but the cross failed to test such levels. Systematic and high frequency sellers sold into the highs in USD/CHF and this combined with the EUR/CHF failure left the downside in view into the NorAm open. EUR/CHF triggered stops amid the fall below 1.6370 support and bids into 1.6350/55 are now attempting to prop while USD/CHF notes stops below 1.2185.
Looking ahead, there is significant US data on the calendar intraday thus the tight ranges could be set to persist with only a break outside of 1.2150/2250 adding short-term momentum. Elsewhere, the Swiss Federal Treasury announced today it was to reopen its 2.0 percent bond maturing in 2016 amid the latest tender.
Sterling Outlook (10th April 2007)
Cable tested 1.9720 offers late in the European morning, after pushing its recovery envelope from yesterday's 10-day low of 1.9592. The USD is suffering on fears that the US sub-prime crisis might be spreading to higher-quality loans, re: yesterday's dividend slash and 2007 profit-warning from American Home Mortgage (The Times). The greenback is also being negatively impacted by trade tensions between the US and China.
Additional sell interest is tipped at 1.9735, a 61.8% Fibo retracement point of the fall from 1.9823 (Apr 3, 10-week peak) to 1.9592. Further offers are noted at 1.9770. Prior sell orders at the latter level kept a lid on GBP/USD last Wednesday and Thursday, before the "unchanged" BoE base rate verdict. 1.9700 (today's Asian session peak) is now a pullback support point.
Lower props include 1.9660/70 and 1.9614 (today's Asian session base). The Fed's Mishkin, Fisher and Plosser are respectively slated to speak at 13:30GMT, 17:00GMT and 23:30GMT. Minutes from the March 20/21 FOMC meeting will be published tomorrow (Wednesday).
Additional sell interest is tipped at 1.9735, a 61.8% Fibo retracement point of the fall from 1.9823 (Apr 3, 10-week peak) to 1.9592. Further offers are noted at 1.9770. Prior sell orders at the latter level kept a lid on GBP/USD last Wednesday and Thursday, before the "unchanged" BoE base rate verdict. 1.9700 (today's Asian session peak) is now a pullback support point.
Lower props include 1.9660/70 and 1.9614 (today's Asian session base). The Fed's Mishkin, Fisher and Plosser are respectively slated to speak at 13:30GMT, 17:00GMT and 23:30GMT. Minutes from the March 20/21 FOMC meeting will be published tomorrow (Wednesday).
Yen Outlook (10th April 2007)
The JPY crosses influenced price action in quiet European trade. Decent gains in AUD/JPY and a firmer EUR/JPY helped to underpin USD/JPY throughout the session. Aussie was buoyed amid expectations of heavy AUD positive M&A flow and this lifted AUD/JPY to fresh 10-year highs of 98.23.
EUR/JPY extended the overnight rally to record a 159.95 high. Exporter offers and general selling by option names capped and the pair favoured consolidation around the 159.80 area for a large part of the session. USD/JPY maintained a narrow trading range, with back ground support coming from the JPY crosses, yet topside movement was capped by exporter and sovereign name offers from 119.20 up to 119.35. The weekend G7 meeting and renewed concerns that problems in the US sub-prime loan market could weigh on price action going forward.
An unnamed German official said that FX would be discussed at the meeting, although there was no specific mention of JPY. Interestingly, BOJ Governor Fukui said there was no rapid return of the JPY carry trade despite the overnight performance in the JPY crosses. He confirmed that rates would move at a gradual pace.
EUR/JPY extended the overnight rally to record a 159.95 high. Exporter offers and general selling by option names capped and the pair favoured consolidation around the 159.80 area for a large part of the session. USD/JPY maintained a narrow trading range, with back ground support coming from the JPY crosses, yet topside movement was capped by exporter and sovereign name offers from 119.20 up to 119.35. The weekend G7 meeting and renewed concerns that problems in the US sub-prime loan market could weigh on price action going forward.
An unnamed German official said that FX would be discussed at the meeting, although there was no specific mention of JPY. Interestingly, BOJ Governor Fukui said there was no rapid return of the JPY carry trade despite the overnight performance in the JPY crosses. He confirmed that rates would move at a gradual pace.
Euro Outlook (10th April 2007)
The early Asian rally to 1.3434 removed stops but spot failed to retest the 1.3440 high from last week. European action saw the bulk of the market return from the long weekend and thus liquidity thickened. Option related sales are still seen trailing back to 1.3450. German and French data did little to add further volatility thus Europeans favored buying EUR/JPY but the failure to touch 160 forced a slight pullback and this weighed on EUR/USD.
The pair eased back to 1.3400/05 support before fresh buying emerged and the price soon rebounded to leave the sub-1.34 stops intact with 1.3405/25 then worked. Looking ahead, the market has already discounted the ECB meeting this week. The verdict is due on Thursday but in a recent poll of 72 economists, not one of the participants opted for Euro Zone refinance rates to finish the week at a different point to where they started.
As a result, it will be the tone from the accompanying statement that garners more support for the Euro. Should Trichet talk up inflation risks, as his colleges have been, then EUR/USD could cast an eye on the large 1.35 KO's that expire both sides of the result.
The pair eased back to 1.3400/05 support before fresh buying emerged and the price soon rebounded to leave the sub-1.34 stops intact with 1.3405/25 then worked. Looking ahead, the market has already discounted the ECB meeting this week. The verdict is due on Thursday but in a recent poll of 72 economists, not one of the participants opted for Euro Zone refinance rates to finish the week at a different point to where they started.
As a result, it will be the tone from the accompanying statement that garners more support for the Euro. Should Trichet talk up inflation risks, as his colleges have been, then EUR/USD could cast an eye on the large 1.35 KO's that expire both sides of the result.
Friday, April 06, 2007
Swiss Outlook (6th April 2007)
USD/CHF extended its recovery overnight, and headed into the US employment report on firm footing, underpinned by a breakout to the topside in EUR/CHF. From 1.2160 ahead of the US employment report, USD/CHF sprinted up to 1.2220 after the data, tripping stops above 1.2212 recent highs in the process.
EUR/CHF benefited from the upbeat USD employment report which saw 180,000 new jobs created in March and 36,000 jobs added to the two prior month's totals. Receding fears of a deep US slowdown should help keep risk appetite highs, helping create additional demand for carry trades in the weeks ahead. EUR/CHF overcame the major resistance at 1.6320 today and extended its gains within pips of 1.6350 before stalling.
Barriers are rumored at that level. Dips from the highs were modest, only to 1.6335 or so in quiet dealing after the US payrolls. USD/CHF has stops in the 1.2235 area in its sights and they look likely to be taken out in Asia on Monday if not erased in thin New York trading Friday.
EUR/CHF benefited from the upbeat USD employment report which saw 180,000 new jobs created in March and 36,000 jobs added to the two prior month's totals. Receding fears of a deep US slowdown should help keep risk appetite highs, helping create additional demand for carry trades in the weeks ahead. EUR/CHF overcame the major resistance at 1.6320 today and extended its gains within pips of 1.6350 before stalling.
Barriers are rumored at that level. Dips from the highs were modest, only to 1.6335 or so in quiet dealing after the US payrolls. USD/CHF has stops in the 1.2235 area in its sights and they look likely to be taken out in Asia on Monday if not erased in thin New York trading Friday.
Sterling Outlook (6th April 2007)
GBP/USD extended its slump in the wake of a firm US employment report Friday. Trendline support at 1.9665 was lost in the immediate aftermath of the data as prices dipped from near 1.9700. Lows in the high 1.9630s were put in place. Just prior to the data, dealers used thin markets to trigger stops above 0.6815 in EUR/GBP.
That cross eased to 0.6805 after the news hit the tape. Carry trades performed well after the employment report as a stable US economy will keep risk appetites on an upward path, helping the pound modestly outperform the EUR. A significant rebound in US bond yields today will cut into the premium Gilts pay over Treasuries when trade reopens on Tuesday in London.
This should help support the greenback and foster the idea that a medium-term top was put I place this week in the 1.9820s. 1.9545 is the near-term downside bear target. The BRC retail sales monitor is due for release first thing Tuesday morning and will set the stage for further sterling losses if it suggests the BOE will not need to hike in May as the market now expects.
That cross eased to 0.6805 after the news hit the tape. Carry trades performed well after the employment report as a stable US economy will keep risk appetites on an upward path, helping the pound modestly outperform the EUR. A significant rebound in US bond yields today will cut into the premium Gilts pay over Treasuries when trade reopens on Tuesday in London.
This should help support the greenback and foster the idea that a medium-term top was put I place this week in the 1.9820s. 1.9545 is the near-term downside bear target. The BRC retail sales monitor is due for release first thing Tuesday morning and will set the stage for further sterling losses if it suggests the BOE will not need to hike in May as the market now expects.
Yen Outlook (6th April 2007)
USD/JPY and JPY crosses have done little in Asia today with New Zealand, Australia, Hong Kong, Singapore and most if not all of Europe and the UK out for Good Friday. Hong Kong, Europe and the UK are out Monday as well for Easter Monday. With the US also looking at a half day and ahead of the key US non-farm payroll report for March tonight, the lack of action is not all that surprising.
USD/JPY edged up earlier from the 118.70 level to around 118.80 into and immediately following the Tokyo fix. Movement in the pair continues to be constrained by heavy offers above and good bidding interest below. Offers are seen from 119.00 and stretch up to 119.25 with more up to option barriers at 119.50. Stops are mixed in above 119.10, 119.25 and large above 119.50.
Bids are seen trailing down from 118.40-50 overnight lows to 118.00. Stops are mixed in below 118.40, 118.20 and larger below 118.00. EUR/JPY is also ranging after the spurt higher overnight to 159.44, holding between 159.30-50. Option barriers are tipped at 159.80 and 160.00. The record high set on February 23 was 159.63. Other JPY pairs are also better bid.
USD/JPY edged up earlier from the 118.70 level to around 118.80 into and immediately following the Tokyo fix. Movement in the pair continues to be constrained by heavy offers above and good bidding interest below. Offers are seen from 119.00 and stretch up to 119.25 with more up to option barriers at 119.50. Stops are mixed in above 119.10, 119.25 and large above 119.50.
Bids are seen trailing down from 118.40-50 overnight lows to 118.00. Stops are mixed in below 118.40, 118.20 and larger below 118.00. EUR/JPY is also ranging after the spurt higher overnight to 159.44, holding between 159.30-50. Option barriers are tipped at 159.80 and 160.00. The record high set on February 23 was 159.63. Other JPY pairs are also better bid.
Euro Outlook (6th April 2007)
After trading in a quiet range above between 1.3415 and 35 ahead of the US employment report, EUR/USD triggered stops below support at 1.3410 and 1.3380 support in short order after the US employment report surprised to the upside. Payrolls rose 180,000 while 36,000 jobs were added to the two prior month's data. The unemployment rate fell to 4.4%.
Prices dropped to the mid 1.3360s before the day was over, holding just above 1.3360 support and another crop of stop-loss orders just below. Today's US data further reinforces the notion that the Fed is on hold for the foreseeable future and that the economy, while slowing, is still in solid shape. The data supported the carry trades today on the notion that risk appetites should continue to rise amid upbeat data which will support equity markets.
EUR/JPY reached a fresh all-time high of 159.69. 1.3410/15 is now resistance on rallies in EUR/USD while 1.3320 is the near-term downside target early next week. Another thin day is expected Monday with much of Europe on holiday again.
Prices dropped to the mid 1.3360s before the day was over, holding just above 1.3360 support and another crop of stop-loss orders just below. Today's US data further reinforces the notion that the Fed is on hold for the foreseeable future and that the economy, while slowing, is still in solid shape. The data supported the carry trades today on the notion that risk appetites should continue to rise amid upbeat data which will support equity markets.
EUR/JPY reached a fresh all-time high of 159.69. 1.3410/15 is now resistance on rallies in EUR/USD while 1.3320 is the near-term downside target early next week. Another thin day is expected Monday with much of Europe on holiday again.
EUR/USD: Profit-Taking, Ray of Data Sunshine Helping Greenback
EUR/USD is seeing some book-squaring after falling short of the near-term goal of triggering 1.3450 barriers. One factor helping give the buck a modest lift in the last few minutes was an upbeat Chicago Fed mid-west manufacturing survey which rose 0.9% in February. 1.3410 is first support for EUR/USD with more at 1.3380. Stops are building below 1.3380, dealers report. EUR/USD trades at 1.3424.
USD/JPY: Still Poised to Rise Above Ichimoku Cloud Next Week
A sharp fall on the Ichimoku cloud on USD/JPY this week has recent USD/JPY gains poised to open next week above the top of the Ichimoku cloud, adding to current bullish sentiment. The cloud is 118.51-118.68 on Monday and a close above this level is seen as positive.
In the latest updates from the Nikkei press for the Friday morning edition, the paper reports that carry trades are on the rise, but the report does not note any specifics, only recent price action reflecting the carry trade interest. Earlier today, Reuters released some of the intentions of Japanese life insurers.
Meiji Yasuda and Asahi plan to take a neutral stance on foreign investments but Fukoku is planning to buy a net Y100 bln in foreign bonds this year. USD/JPY is gradually edging up from morning lows on real money buying and now trades at 118.66 with offers still at 119.00.
In the latest updates from the Nikkei press for the Friday morning edition, the paper reports that carry trades are on the rise, but the report does not note any specifics, only recent price action reflecting the carry trade interest. Earlier today, Reuters released some of the intentions of Japanese life insurers.
Meiji Yasuda and Asahi plan to take a neutral stance on foreign investments but Fukoku is planning to buy a net Y100 bln in foreign bonds this year. USD/JPY is gradually edging up from morning lows on real money buying and now trades at 118.66 with offers still at 119.00.
USD/JPY: Real Money Buying Underpins
USD/JPY is now at 118.56 after bouncing off lows of 118.43 this morning. Real money buying has been seen off the lows with Japanese investor bids still reported at 118.40 and 118.30. Offers remain at 119.00 staggered up to 119.50 but with the bulk of offers around 119.00-15 and stops mixed in at various levels. Some larger stops are reported at 119.20.
A consistent theme in the Japanese press remains the ongoing demand from Japanese retail investors for higher yielding foreign assets. The proportion of foreign asset holdings are still said to be quite small and expected to rise with new fund launches through April and into Golden Week expected to drive JPY weakness. Some analysts are even forecasting a rise above 120 to 122 in coming sessions as a result.
A consistent theme in the Japanese press remains the ongoing demand from Japanese retail investors for higher yielding foreign assets. The proportion of foreign asset holdings are still said to be quite small and expected to rise with new fund launches through April and into Golden Week expected to drive JPY weakness. Some analysts are even forecasting a rise above 120 to 122 in coming sessions as a result.
EUR/USD: Germany Still Expected to Up GDP Forecast Late in Apr
The German institutes raised their GDP forecasts in February and March but the government has been holding off. Spiegel reports that Germany will raise its forecast to 2.0% at the end of April.
Faster German growth is bringing in higher than expected tax revenues, helping close the deficit that plagued Germany in the early 2000s. EUR/USD is quietly consolidating at 1.3433 after stalling in the low 1.3440s. Dealers suspect there may be one more topside attempt at the 15:00 GMT fixing.
Faster German growth is bringing in higher than expected tax revenues, helping close the deficit that plagued Germany in the early 2000s. EUR/USD is quietly consolidating at 1.3433 after stalling in the low 1.3440s. Dealers suspect there may be one more topside attempt at the 15:00 GMT fixing.
Swiss Outlook (5th April 2007)
Into European action and the Franc was back under pressure as the mild Dollar rebound and the EUR/CHF buying forced USD/CHF slightly higher. Having pivoted the 1.22 mark in Asia spot rallied but Swiss sell interest into the 1.2210/15 area limited the run higher. As a result the price has since drifted between 1.2200 and 1.2210 as momentum wanes ahead of the Easter break.
However, position adjusting ahead of the US Employment report (due Tomorrow) is expected into the 4-Day break. Looking ahead, weekly jobless numbers (12:30 GMT) will hold extra importance while the 16:00 GMT release of the February Chicago Fed Manf. data is the only event-risk on the calendar intraday. Should the Dollar rally then more sellers in USD/CHF are seen into 1.2235/40.
Against the Euro the Franc has consolidated the overnight push back to a fresh historic low. 1.6320 printed in late NY trading with 1.6314 the Asian session high. Into Europe and key technical resistance is back in focus but Swiss and Tech accounts have sold into the highs to cap the cross at 1.6318.
However, position adjusting ahead of the US Employment report (due Tomorrow) is expected into the 4-Day break. Looking ahead, weekly jobless numbers (12:30 GMT) will hold extra importance while the 16:00 GMT release of the February Chicago Fed Manf. data is the only event-risk on the calendar intraday. Should the Dollar rally then more sellers in USD/CHF are seen into 1.2235/40.
Against the Euro the Franc has consolidated the overnight push back to a fresh historic low. 1.6320 printed in late NY trading with 1.6314 the Asian session high. Into Europe and key technical resistance is back in focus but Swiss and Tech accounts have sold into the highs to cap the cross at 1.6318.
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