Strong Dollar demand from importers and investment trust accounts helped put a floor under the market at levels around 121.25 early in the Asian session but determined Middle East selling, carry trade unwinding, large Japanese city bank sales from levels around 121.45-50 plus a sizeable amount of miss-led data players selling out of intraday longs forced the market to lows of 120.85.
A cruel twist for the short-term players with the Dollar turning sharply higher following Japanese CPI data correction from down 0.4% to down 0.1%. Importers still have clout and the move back to levels around 121.45-47 in early London was reportedly driven mainly by Japanese names and helped by news of N.Korea missile launches into the Sea Of Japan.
A healthy clear out and although the downside is calling another run higher is possible before the week is out. Option related interest could shape European action with 121.50 expiries and stops touted tight above. Offers 121.65 through 121.85 with 122.00 barriers. Small bids in the 121.20-30 area and stops under 121.00. We look for a 121.35 to 121.65 range into New York.
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