USD/CHF has once again been trapped between a rock and the carry trade. Broader Dollar sentiment helped the price drift to the top of the overnight 1.2140/60 range in Europe but it was the latest EUR/CHF buying that forced the brief push to 1.2167. SNB comments emerged as the cross hit the new all-time highs and as a result of profit-taking in EUR/CHF the pair was quickly depressed back below 1.2160.
Further EUR/CHF volatility is expected to impact the Dollar pair with more offers seen into 1.2180 and 1.2200. The local seller of [EUR/CHF] that kept the pair trading below 1.6530/35 eventually saw their supply absorbed but the new highs at 1.6541 were promptly followed by the Roth comments that saw funds look for the exit.
Looking ahead, US data today kicks off with US Housing Starts at 12:30 GMT followed by a brace of Fed speakers at 13:00 GMT (Plosser and Kroszner). April Industrial Production and capacity data is set for unveiling at 13:15 GMT (+0.3% forecast) with a gap seen before the markets get the Kohn comments at 15:00 GMT. The Dallas speech set for 17:00 GMT concludes the risk-profile for the day.
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Wednesday, May 16, 2007
Sterling Outlook (16th May 2007)
Cable dropped to 1.9825 bids after the 09:30GMT publication of May's quarterly BoE inflation report, primarily on the back of comments from Mervyn King. The BoE Governor says if UK wage pressures diminished, it would suggest upside risks to UK CPI had receded (Reuters). Annualized average UK earnings rose by a sub-forecast 4.5% in the three months to March.
The BoE inflation report suggests the UK base rate may need be hiked by another 25bp to 5.75% in Q3, possibly in August. Additional sterling demand is noted at 1.9800. Sub-figure support points include 1.9775, 1.9765 and 1.9750. There is speculation that sovereign demand helped base GBP/USD at one-month lows circa 1.9750 yesterday, post-UK CPI.
1.9841 (pre-BoE inflation report low) is now a resistance level. Upper obstacles include 1.9860 and 1.9875 (early Europe high). Some buy stops are pegged above 1.9880. 1.9905-10 option strikes roll off at 14:00GMT today.
US April housing starts will be unveiled at 12:30GMT. Forecast: 1480k. US April IP and CU numbers ensue at 13:15GMT.
The BoE inflation report suggests the UK base rate may need be hiked by another 25bp to 5.75% in Q3, possibly in August. Additional sterling demand is noted at 1.9800. Sub-figure support points include 1.9775, 1.9765 and 1.9750. There is speculation that sovereign demand helped base GBP/USD at one-month lows circa 1.9750 yesterday, post-UK CPI.
1.9841 (pre-BoE inflation report low) is now a resistance level. Upper obstacles include 1.9860 and 1.9875 (early Europe high). Some buy stops are pegged above 1.9880. 1.9905-10 option strikes roll off at 14:00GMT today.
US April housing starts will be unveiled at 12:30GMT. Forecast: 1480k. US April IP and CU numbers ensue at 13:15GMT.
Yen Outlook (16th May 2007)
The combination of a generally softer USD and the "carry trade" theme has held USD/JPY tight. Tuesday's U.S CPI data gave every indication that price pressures are under control and that a Fed easing later in the year was still a possibility. The data took the edge off the USD and sent EUR/USD higher, which in turn has driven EUR/JPY to new highs of 163.87.
The Yen has also been hit by fresh carry trade activity as risk is clearly back on the menu. USD/JPY has been held just ahead of 120.60 and exporters, real money accounts and central bank activity are in the frame. Talk of Yen repatriation following bond coupon and redemption payments has also impacted. USD/JPY Offers are said to run to 120.60 up to 120.75 and there is further talk of a large 120.75 option barrier.
Other option plays reportedly include a 400 mln 120.00 expiry today and 121.00 barriers. Looking ahead, expect the Yen market to steady ahead of Thursday's Japanese GDP data and the speech from BOJ Governor, Fukui.
The Yen has also been hit by fresh carry trade activity as risk is clearly back on the menu. USD/JPY has been held just ahead of 120.60 and exporters, real money accounts and central bank activity are in the frame. Talk of Yen repatriation following bond coupon and redemption payments has also impacted. USD/JPY Offers are said to run to 120.60 up to 120.75 and there is further talk of a large 120.75 option barrier.
Other option plays reportedly include a 400 mln 120.00 expiry today and 121.00 barriers. Looking ahead, expect the Yen market to steady ahead of Thursday's Japanese GDP data and the speech from BOJ Governor, Fukui.
Euro Outlook (16th May 2007)
The Euro has been supported by both data and cross buying in Europe. EZ CPI and buying in EUR/CHF, JPY & GBP helped underpin the unit and into early NorAm trading and EUR/USD sits near the 1.3600 level. Offers around 1.3625/30 are eyed on the topside while 1.3685 support is seen key to the trend.
Looking ahead, option dealers note further 1.3600 strikes at the NY cut at 14:00 GMT. Add to the equation the 1.3570, 1.3650 and 1.3750 expiry interest and the pair could sit close to a maturity wherever it trade at 14:00 GMT. Stops in EUR/USD are noted below 1.3580, 70 and 60 but traders look to the 1.3630 in the medium-term should the price retain its bullish bias.
US data today kicks off with US Housing Starts at 12:30 GMT followed by a brace of Fed speakers at 13:00 GMT (Plosser and Kroszner). April Industrial Production and capacity data is set for unveiling at 13:15 GMT (+0.3% forecast) with a gap seen before the markets get another central bank double at 15:00 GMT. This comes in the form of Kohn in the Dollar corner and the ECB"s Weber coming out for the Euro. Dallas comments at 17:00 GMT conclude the risk-profile.
Looking ahead, option dealers note further 1.3600 strikes at the NY cut at 14:00 GMT. Add to the equation the 1.3570, 1.3650 and 1.3750 expiry interest and the pair could sit close to a maturity wherever it trade at 14:00 GMT. Stops in EUR/USD are noted below 1.3580, 70 and 60 but traders look to the 1.3630 in the medium-term should the price retain its bullish bias.
US data today kicks off with US Housing Starts at 12:30 GMT followed by a brace of Fed speakers at 13:00 GMT (Plosser and Kroszner). April Industrial Production and capacity data is set for unveiling at 13:15 GMT (+0.3% forecast) with a gap seen before the markets get another central bank double at 15:00 GMT. This comes in the form of Kohn in the Dollar corner and the ECB"s Weber coming out for the Euro. Dallas comments at 17:00 GMT conclude the risk-profile.
EUR/USD: Taking Stock after Reaching 1.3608
EUR/USD is consolidating gains around 1.3600 after reaching highs around 1.3608 after breaking free of its shackles at 1.3565. Dealers note a variety of names being blamed for the topside breakout, with one a well-known hedge fund, another a sovereign account that has recently been helping keep the EUR bottled up in ranges and a third a UK clearing bank. Anyone or all could have been involved. Dealers see a quiet afternoon below the recent peaks in the 1.3615/25 area. 1.3565 is support on pullbacks.
USD/CHF: Bears Bare Their Claws As Greenback Gouged
Just as the market was getting used to a kinder gentler uptrend in USD/CHF that had the pair open the New York session in the rarified atmosphere of 1.2200 the bears evacuated their caves and came pouring down the slopes to massacre the unsuspecting dollar bulls. It was a double whammy, EUR/CHF & USD/CHF sell off which pummeled the poor old greenback and laid waste any nascent plans for a 1.2200 plus revival tomorrow.
Stops at 1.2210 & 20 were not allowed to be toyed with, and anyone standing in the way was summarily executed. The sell off was swift and sharp, from 1.2200 to 1.2125, some profit taking brought it back to flirt with 1.2150, then another sell off rattled that rally, this time the low was 1.2130, and since the pair has traded in an apprehensive 1.2135/42 range.
EUR/CHF collapsed from challenging its eight year high chalked up on May 1st, failing at 1.6535 and falling to 1.6503 and is holding tentatively around 1.6510. SNB intervention fears and technicians selling the topside failure acted as the catalyst. Now the bears are back in control again, and EUR/USD is back above 1.3600 the street seems more purposeful, amazing what a P&L injection can do for the psyche.
Further downside for USD/CHF to be expected, stops at 1.2080 and 1.1995 on the downside - after all this is all old ground. Topside stops at 1.2210 & 20 seem out of reach given current sentiment.
Stops at 1.2210 & 20 were not allowed to be toyed with, and anyone standing in the way was summarily executed. The sell off was swift and sharp, from 1.2200 to 1.2125, some profit taking brought it back to flirt with 1.2150, then another sell off rattled that rally, this time the low was 1.2130, and since the pair has traded in an apprehensive 1.2135/42 range.
EUR/CHF collapsed from challenging its eight year high chalked up on May 1st, failing at 1.6535 and falling to 1.6503 and is holding tentatively around 1.6510. SNB intervention fears and technicians selling the topside failure acted as the catalyst. Now the bears are back in control again, and EUR/USD is back above 1.3600 the street seems more purposeful, amazing what a P&L injection can do for the psyche.
Further downside for USD/CHF to be expected, stops at 1.2080 and 1.1995 on the downside - after all this is all old ground. Topside stops at 1.2210 & 20 seem out of reach given current sentiment.
GBP/USD: Pound Underperforming Amid Fears Rates have Peaked
UK inflation rates remain far above their 2% target but have receded back below the politically sensitive 3% rate. Dealers are nervous that the BOE may not hike rates as aggressively as expected, or at all, listening to some analysts.
Cable has underperformed today, trailing EUR/USD by a wide margin as the USD loses steam across the board today. EUR/GBP has been in a very nice uptrend since bottoming last Wednesday 0.6781, reaching 0.6856 this morning before easing slightly. Hourly uptrend support comes in at 0.6840 now.
Combined with an hourly bottom at 0.6834 this morning in London, it is a sure bet stops are building now in the low 0.6830s. 1.9850 bids are eyed on dips near-term. Small stops were triggered there earlier. Small offers are seen at 1.9880 near-term. GBP/USD topped out at 1.9872 earlier, and trades now at 1.9860.
Cable has underperformed today, trailing EUR/USD by a wide margin as the USD loses steam across the board today. EUR/GBP has been in a very nice uptrend since bottoming last Wednesday 0.6781, reaching 0.6856 this morning before easing slightly. Hourly uptrend support comes in at 0.6840 now.
Combined with an hourly bottom at 0.6834 this morning in London, it is a sure bet stops are building now in the low 0.6830s. 1.9850 bids are eyed on dips near-term. Small stops were triggered there earlier. Small offers are seen at 1.9880 near-term. GBP/USD topped out at 1.9872 earlier, and trades now at 1.9860.
USD/JPY: Japanese Investment in Foreign Assets Continue
Reports last week in the Nikkei stated that flows into funds targeting foreign investments by Japanese investors were higher than domestic investment flows. More data reported by the Nikkei this morning confirms those flows and continues to be a factor fueling JPY weakness and JPY cross buying. The Nikkei cited data from the Japanese Investment Trusts Association.
It reports that the balance of stocks held by investment trusts rose to a record Y23.44 tln, up 21% on the year, though stock funds targeting domestic shares have actually seen net outflows now for the sixth straight month. The rise in overall trusts has been fuelled by the demand for foreign stock trusts, which total Y7.87 tln. Domestic stock holdings are currently at Y15.56 tln. USD/JPY continues to stabilize around 120.25 after the morning sell-off.
It reports that the balance of stocks held by investment trusts rose to a record Y23.44 tln, up 21% on the year, though stock funds targeting domestic shares have actually seen net outflows now for the sixth straight month. The rise in overall trusts has been fuelled by the demand for foreign stock trusts, which total Y7.87 tln. Domestic stock holdings are currently at Y15.56 tln. USD/JPY continues to stabilize around 120.25 after the morning sell-off.
USD/JPY: Bullish Trend Intensity Signal Advances
After recent stalls, the USD/JPY bullish trend intensity signal has advanced a notch to 16. The EUR/JPY trend signal remains neutral at 30. The EUR/USD trend signal is neutral at 20 and the GBP/USD trend signal is neutral at 18.
The USD/CHF trend signal is neutral at trend-ready levels of 10. The EUR/GBP trend signal initiated a new bullish trend, edging a notch higher to 12. These proprietary indicators are updated each trading day after the NY close.
The USD/CHF trend signal is neutral at trend-ready levels of 10. The EUR/GBP trend signal initiated a new bullish trend, edging a notch higher to 12. These proprietary indicators are updated each trading day after the NY close.
US ECON: Cleveland Fed's Median CPI +0.2% in April
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in April while the 16% trimmed-mean Consumer Price Index rose 0.2% (2.5% annualized rate) during the month. Over the last 12 months, the median CPI rose 3.4%, the 16% trimmed-mean CPI rose 2.8%, the CPI 2.6%, and the CPI less food and energy 2.3%.
The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics (BLS) monthly CPI report.
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (5.1% annualized rate) in April. The CPI less food and energy rose 0.2% (2.1% annualized rate) on a seasonally adjusted basis.
The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics (BLS) monthly CPI report.
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (5.1% annualized rate) in April. The CPI less food and energy rose 0.2% (2.1% annualized rate) on a seasonally adjusted basis.
EUR/USD: Rally Reaches 1.3600 as USD Slump Accelerates
EUR/USD has reached 1.3600, a fibo 1.382% projection off the 1.3463/1.3565 range that contained EUR/USD the last three trading sessions. 1.3615/25 is seen containing rallies near-term with several tops in that region dating back to the beginning of May. 1.3683 all-time highs remain a topside target in the near-term.
USD/JPY: Stabilizing as US Stocks, Bond Yields Rise
USD/JPY is stabilizing around 120.25/30 with the DJIA now showing triple digit gains. In addition, bond yields have reversed earlier declines in reaction to the stock rally, with yields now at 4.70% on the ten-year bond according to TradeWeb and above pre-CPI levels.
This is helping to support USD/JPY. The NAR existing home sales shows that sales this quarter have improved over the last quarter of 2006 and prices appear to have stabilized. The lower median house price is being blamed on fewer sales of more expensive homes. EUR/JPY and GBP/JPY are trading to fresh session highs, helping to underpin USD/JPY on the cross as well.
This is helping to support USD/JPY. The NAR existing home sales shows that sales this quarter have improved over the last quarter of 2006 and prices appear to have stabilized. The lower median house price is being blamed on fewer sales of more expensive homes. EUR/JPY and GBP/JPY are trading to fresh session highs, helping to underpin USD/JPY on the cross as well.
Sterling Outlook (15th May 2007)
Cable has fallen by more than half-a-cent to a new one-month low of 1.9747 since the 08:30GMT disclosure of April's as-expected UK inflation figures. Annualized CPI declined to 2.8%, from 3.1% in March. The BoE's target level is 2.0%. Annualized RPI dropped to 4.5%, from 4.8% previously.
Sub-1.9747 bear targets are touted 1.9710, 1.9590, 1.9545 and 1.9410. Resistance levels include 1.9762 (last Friday's low), 1.9782 and 1.9800.
Sterling had climbed from the European open, as the continent absorbed April's better-than-expected 28.9 RICS UK house price balance. Stops above 1.9820 were tripped en route to an intra-day peak of 1.9829.
News-wise: Reuters has agreed to a GBP 8.7bn takeover by Thomson (FT website). M&A flow helped inflate GBP/USD to a high of 2.0000 last Wednesday.
Today's key US event risk is the 12:30GMT disclosure of April inflation numbers. Core CPI is forecast +0.2% m/m, +2.4% y/y. Headline CPI is forecast +0.5% m/m, +2.6% y/y. March TIC data follows at 13:00GMT. Net long-term flows of $73.2bn are forecast, from $58.1bn in February.
Sub-1.9747 bear targets are touted 1.9710, 1.9590, 1.9545 and 1.9410. Resistance levels include 1.9762 (last Friday's low), 1.9782 and 1.9800.
Sterling had climbed from the European open, as the continent absorbed April's better-than-expected 28.9 RICS UK house price balance. Stops above 1.9820 were tripped en route to an intra-day peak of 1.9829.
News-wise: Reuters has agreed to a GBP 8.7bn takeover by Thomson (FT website). M&A flow helped inflate GBP/USD to a high of 2.0000 last Wednesday.
Today's key US event risk is the 12:30GMT disclosure of April inflation numbers. Core CPI is forecast +0.2% m/m, +2.4% y/y. Headline CPI is forecast +0.5% m/m, +2.6% y/y. March TIC data follows at 13:00GMT. Net long-term flows of $73.2bn are forecast, from $58.1bn in February.
Yen Outlook (15th May 2007)
A 4.5% fall in Japanese machinery orders during March knocked the Yen in overnight trade but the pick up in USD/JPY was short lived and early European action saw the Yen recover to 120.10 from 3-month lows of 120.53. China and country ratings the other factors at play for the Yen.
Market jitters over Chinese policy and reference to a faster CNY rise has kept the Yen active while talk of a possible Moody's upgrade to Japan's sovereign rating held market attention but had little impact. The weekend G-8 meetings are not expected to deliver anything meaningful for the forex market and with no change in rates expected at the BOJ the outlook is once more focused on the U.S data run and the trends in the carry trades. USD/JPY is holding softer levels as coupon and redemption payments favour the Yen.
Exporters have also been active in the 121.30 area and there is talk of heavy corporate offers ahead of 120.60. Stops are touted above 120.65 mixed in with option offers ahead of a 120.75 barrier. There is also talk of a 120.50 strangle expiry this Friday, which might be having a sobering effect on price.
Market jitters over Chinese policy and reference to a faster CNY rise has kept the Yen active while talk of a possible Moody's upgrade to Japan's sovereign rating held market attention but had little impact. The weekend G-8 meetings are not expected to deliver anything meaningful for the forex market and with no change in rates expected at the BOJ the outlook is once more focused on the U.S data run and the trends in the carry trades. USD/JPY is holding softer levels as coupon and redemption payments favour the Yen.
Exporters have also been active in the 121.30 area and there is talk of heavy corporate offers ahead of 120.60. Stops are touted above 120.65 mixed in with option offers ahead of a 120.75 barrier. There is also talk of a 120.50 strangle expiry this Friday, which might be having a sobering effect on price.
Euro Outlook (15th May 2007)
EUR/USD made an early stab at the topside into European trading and 1.3560 printed. However, the topside continues to look thick and with key data awaited many preferred to hold out before re-entering the market. Yesterday we at IFR noted that 1.3565/75 was key to the medium-term upside but this large resistance zone now stretches to 1.3585 as the talk of central bank sellers into 1.3580 and the 21-Day moving average line near 1.3585 fortify the previously noted double-day high at 1.3565 (May 9 & 10th) and the 50% Fibo at 1.3573, of the sell-off from 1.3683 (April 27th) to 1.3463 (May 11th).
Bids into 1.3530/35 have propped on dips thus far and as a result the stops seen below 1.3520 have remained intact. Option traders note 1.3500, 1.3530 & 1.3550 strikes intraday and the lower of these expiries could offer support to the pair should the downside come into view ahead of the 14:00 GMT NY cut. Into NorAm trading and the US data/comment deluge begins with the Bernanke speech set for 12:10 GMT. Following this at 12:30 GMT, US April CPI (+0.5% forecast) and May NY Manf. data are released.
Bids into 1.3530/35 have propped on dips thus far and as a result the stops seen below 1.3520 have remained intact. Option traders note 1.3500, 1.3530 & 1.3550 strikes intraday and the lower of these expiries could offer support to the pair should the downside come into view ahead of the 14:00 GMT NY cut. Into NorAm trading and the US data/comment deluge begins with the Bernanke speech set for 12:10 GMT. Following this at 12:30 GMT, US April CPI (+0.5% forecast) and May NY Manf. data are released.
Monday, May 14, 2007
US TECHS: Commodities Outlook; Gold and Oil
Last week's break in [gold] broke uptrends from early January but not longer trends dating back to last October. Prices are above both those trendlines today, found in the $664-70 band on June futures. Outside week structure down last week with a close on the lower end of range is a moderate concern for bulls. Daily trends turned bearish on Friday, and a new Trend Intensity signal was set the day before.
However, the above-noted uptrends are overlapped by weekly envelope floors around $667, so supports have by no means irretrievably broken down. Bulls are best served if the market can get back past 50-day moving averages and key monthly levels in the $674-75 band and stay above. Daily momentum is just crossing into negative territory today; should this prove to be a short-lived move, weekly resistance in the $682-88 zone will be tested this week.
In [oil], only modest gains are needed to neutralize the bearish Trend Intensity signal set last week. Simply put, the failure to break below mid-March floors in the low $60 zone helped stem selling pressures, and now the $63.60-64.00 band has become important, marking significant daily and weekly resistance.
Daily trend models turn bullish today above $61.90 while weekly models can turn bearish (at week's end) below $63.60. Lots of moving average resistance is also found in the upper $63 handle, so that's the area to watch to see if bulls can retake the market's reins.
However, the above-noted uptrends are overlapped by weekly envelope floors around $667, so supports have by no means irretrievably broken down. Bulls are best served if the market can get back past 50-day moving averages and key monthly levels in the $674-75 band and stay above. Daily momentum is just crossing into negative territory today; should this prove to be a short-lived move, weekly resistance in the $682-88 zone will be tested this week.
In [oil], only modest gains are needed to neutralize the bearish Trend Intensity signal set last week. Simply put, the failure to break below mid-March floors in the low $60 zone helped stem selling pressures, and now the $63.60-64.00 band has become important, marking significant daily and weekly resistance.
Daily trend models turn bullish today above $61.90 while weekly models can turn bearish (at week's end) below $63.60. Lots of moving average resistance is also found in the upper $63 handle, so that's the area to watch to see if bulls can retake the market's reins.
US ECON: Philly Fed Survey of Professional Forecasters Updated
The Philadelphia Fed today released the second quarter 2007 Survey of Professional Forecasters. Participants reduced their projections for growth this year.
Highlights include:
* Q2 GDP now seen 2.4%, down from 2.7% in previous survey
* 2007 Core PCE deflator seen at 2.1%, up from 2.0%
* 2007 Unemployment Rate now 4.6%, down from 4.7% prior
* Employment growth estimates upped for 2007, lowered for 2008
Core PCE inflation will average 2.1% on a fourth-quarter over fourth-quarter basis in each of the next three years. These projections are nearly unchanged from those of the previous survey, when the forecasters thought core PCE inflation would average 2.0 percent in 2007 and 2.1 percent in each of the following two years. Forecasters expect core CPI inflation to average 2.3% (Q4 over Q4) in each of the next three years. These projections are unchanged from those of the previous survey.
Forecasters see growth rebounding to 2.9% in 2008, nearly the same rate they expected in the last survey. The unemployment rate is expected to average 4.6% this year, down from 4.7% previously, and 4.8% next year, unchanged from the previous survey. Nonfarm payrolls are estimated to increase by an average 151k per month in 2007 and 122,000 per month in 2008. Previously, the forecasters thought nonfarm payroll employment would rise 135k per month in 2007 and 131k per month in 2008.
Highlights include:
* Q2 GDP now seen 2.4%, down from 2.7% in previous survey
* 2007 Core PCE deflator seen at 2.1%, up from 2.0%
* 2007 Unemployment Rate now 4.6%, down from 4.7% prior
* Employment growth estimates upped for 2007, lowered for 2008
Core PCE inflation will average 2.1% on a fourth-quarter over fourth-quarter basis in each of the next three years. These projections are nearly unchanged from those of the previous survey, when the forecasters thought core PCE inflation would average 2.0 percent in 2007 and 2.1 percent in each of the following two years. Forecasters expect core CPI inflation to average 2.3% (Q4 over Q4) in each of the next three years. These projections are unchanged from those of the previous survey.
Forecasters see growth rebounding to 2.9% in 2008, nearly the same rate they expected in the last survey. The unemployment rate is expected to average 4.6% this year, down from 4.7% previously, and 4.8% next year, unchanged from the previous survey. Nonfarm payrolls are estimated to increase by an average 151k per month in 2007 and 122,000 per month in 2008. Previously, the forecasters thought nonfarm payroll employment would rise 135k per month in 2007 and 131k per month in 2008.
EUR/USD: No Data, No Flow, No Go
Traders are bemoaning woefully scarce end-user flow this morning, with Chicago for the second Monday in a row showing little or no interest, with a paltry E30-35mn trading in the first hour of pit trading. Spot has traded in a 1.3541/55 "range" so far, with CTAs and ECNs noticeably absent.
Spot has been moored at the 1.3547/50 mark for half an hour, and if you flipped a couple of pages forward on the traders "day finder" calendar you would swear it was July. Traders are hoping that tomorrow's German and Eurozone GDP data will liven things up, as well as US CPI and various other US indicators, however that won't help today, and it seems that traders are determined to keep their powder dry for later in the week.
Spot has been moored at the 1.3547/50 mark for half an hour, and if you flipped a couple of pages forward on the traders "day finder" calendar you would swear it was July. Traders are hoping that tomorrow's German and Eurozone GDP data will liven things up, as well as US CPI and various other US indicators, however that won't help today, and it seems that traders are determined to keep their powder dry for later in the week.
Swiss Outlook (14th May 2007)
The new week has marked a return to the carry trade and this has dented the CHF against both the USD and the EUR. Asian action saw the Swiss Franc firm against the Dollar but ease verses the Euro. However, into European trading and USD/CHF finally took note of the cross pressure as EUR/CHF broke back into the 1.65's.
Offers into the 1.2195/2200 area failed to cap but 1.2210 sellers have stalled the rally as the cross attempts to cement the break higher. EUR/CHF hit 1.6520 but bulls have the all-time high at 1.6536 in their sights with option barriers above into the 1.6600 level. Looking ahead, the attention is on the post-European close Fed speakers. At 20:00 GMT Fisher speaks on the service sector while Lockhart is set to speak at 22:30 GMT.
Local dealers look to the Tuesday release of Swiss retail sales data for March (07:15 GMT). The solid job market situation combined with the warm weather should help keep the index on the strong side but this is unlikely to force a Franc U-turn as fresh carry interest keeps the unit on the weak side despite the weekend Jordan comments on higher rates and inflation into H2.
Offers into the 1.2195/2200 area failed to cap but 1.2210 sellers have stalled the rally as the cross attempts to cement the break higher. EUR/CHF hit 1.6520 but bulls have the all-time high at 1.6536 in their sights with option barriers above into the 1.6600 level. Looking ahead, the attention is on the post-European close Fed speakers. At 20:00 GMT Fisher speaks on the service sector while Lockhart is set to speak at 22:30 GMT.
Local dealers look to the Tuesday release of Swiss retail sales data for March (07:15 GMT). The solid job market situation combined with the warm weather should help keep the index on the strong side but this is unlikely to force a Franc U-turn as fresh carry interest keeps the unit on the weak side despite the weekend Jordan comments on higher rates and inflation into H2.
Sterling Outlook (14th May 2007)
Cable dropped to 1.9800 bids after the 08:30GMT disclosure of April's sub-forecast 2.4% annualized rise in UK core output producer prices. 2.7% was expected. Demand at 1.9820 was propping GBP/USD into the data release.
Sub-1.9800 prop points include 1.9778 (Friday's NY session low), 1.9762 (Friday's European morning one-month low), 1.9750 and 1.9710. GBP/USD resistance levels include 1.9845 (Friday's rebound high from 1.9762) and 1.9880.
EUR/GBP offers are touted at 0.6840, with some buy stops pegged above 0.6845. Exotic option barriers reside at, and just ahead of, 0.6875.
The British Chambers of Commerce predicts that annualized UK economic growth will fall to 1.9% in Q1 2008, from 3.0% in Q4 2006 (City AM).
UK April inflation figures will be unveiled at 08:30GMT tomorrow. Annualized CPI is forecast to fall to 2.8%, from 3.1% in March. Annualized RPIX is forecast at 4.5%m from 4.8% previously.
This week's key UK event risk is Wednesday's publication of the quarterly BoE inflation report.
Sub-1.9800 prop points include 1.9778 (Friday's NY session low), 1.9762 (Friday's European morning one-month low), 1.9750 and 1.9710. GBP/USD resistance levels include 1.9845 (Friday's rebound high from 1.9762) and 1.9880.
EUR/GBP offers are touted at 0.6840, with some buy stops pegged above 0.6845. Exotic option barriers reside at, and just ahead of, 0.6875.
The British Chambers of Commerce predicts that annualized UK economic growth will fall to 1.9% in Q1 2008, from 3.0% in Q4 2006 (City AM).
UK April inflation figures will be unveiled at 08:30GMT tomorrow. Annualized CPI is forecast to fall to 2.8%, from 3.1% in March. Annualized RPIX is forecast at 4.5%m from 4.8% previously.
This week's key UK event risk is Wednesday's publication of the quarterly BoE inflation report.
Yen Outlook (14th May 2007)
Tight ranges were a feature overnight with Asian central banks reportedly playing the 120.00 to 120.35 band. Trading conditions were thin and there was reportedly a lack of Japanese corporate interest. The view among local players is that some significant hedging activity passed through the market last week and that this looks to have cleared the order boards.
People are hearing of patchy exporter interest in the 120.40-50 area and also reports of importer bids close to 120.00. There are also rumours that a leading Asian player has a very short term option strangle play on board with an upside level at 120.50. The Yen drew some support from higher than expected Japanese wholesale prices for April but the move proved short lived and with the "carry trade" looking to be back on the Yen is trading towards the bottom of its Monday range.
Much is being made of tomorrow's reportedly sizeable U.S coupon and bond redemption proceeds although the market has a habit of over factoring the likely impact of the repatriation flows, if any.
People are hearing of patchy exporter interest in the 120.40-50 area and also reports of importer bids close to 120.00. There are also rumours that a leading Asian player has a very short term option strangle play on board with an upside level at 120.50. The Yen drew some support from higher than expected Japanese wholesale prices for April but the move proved short lived and with the "carry trade" looking to be back on the Yen is trading towards the bottom of its Monday range.
Much is being made of tomorrow's reportedly sizeable U.S coupon and bond redemption proceeds although the market has a habit of over factoring the likely impact of the repatriation flows, if any.
Euro Outlook (14th May 2007)
Into European trading and EUR/USD pulled back from the 1.3550/55 level after an Asian central bank emerged on the offer to cap the topside. However, bids into 1.3525 propped the dip and with EZ March IP slightly better than expected the Euro was underpinned. Any break above 1.3550/55 will see stops trigger before more offers are encountered into 1.3565 (the dble-day high May 9&10th).
This combined with the 50% Fibo, of 1.3683 (April 27th) to 1.3463 (May 11th), at 1.3573 forms a 1.3565/75 resistance zone. Therefore, a break above 1.3575 would be a more significant topside break and indicative that a return to the 1.3683 all-time highs could be looked for. Option traders note the expiry today of more 1.3500 and 1.3600 strikes.
Both are set to mature at the NY cut at 14:00 GMT along with large 1.3700's. Looking ahead, there is a lack of US data on the calendar intraday and as a result the attention will turn to the post-European close Fed speakers. At 20:00 GMT Fisher speaks on "The Growing Importance of the Service Sector" followed by Lockhart comments at 22:30 GMT.
This combined with the 50% Fibo, of 1.3683 (April 27th) to 1.3463 (May 11th), at 1.3573 forms a 1.3565/75 resistance zone. Therefore, a break above 1.3575 would be a more significant topside break and indicative that a return to the 1.3683 all-time highs could be looked for. Option traders note the expiry today of more 1.3500 and 1.3600 strikes.
Both are set to mature at the NY cut at 14:00 GMT along with large 1.3700's. Looking ahead, there is a lack of US data on the calendar intraday and as a result the attention will turn to the post-European close Fed speakers. At 20:00 GMT Fisher speaks on "The Growing Importance of the Service Sector" followed by Lockhart comments at 22:30 GMT.
Saturday, May 12, 2007
GBP/USD: Rally Cools; Profit-taking in GBP/JPY
Cable is easing back toward minor intraday support at 1.9813 after a pop to 1.9845 at its best levels. Profit-taking in GBP/JPY is having the most pronounced influence on prices as dealers look to wind things up after a choppy week. GBP/JPY jumped two JPY from 236.50 to 238.50 on a sudden willingness to reassume risk after US equities took off to the upside earlier in the day.
Those gains have moderated, with the cross now changing hands at 238.00. Cable has given back a third of its intraday gains and should find support on dips to 1.9805, the 50% retracement of the 1.9760/1.9845 rally.
Those gains have moderated, with the cross now changing hands at 238.00. Cable has given back a third of its intraday gains and should find support on dips to 1.9805, the 50% retracement of the 1.9760/1.9845 rally.
USD/CHF: US Market Opened Uncertain, Nothing's Changed
For those aficionados of Japanese candle sticks, a Doji is a sign of indecision, a price bar that is simply shaped like a cross indicating that despite the price range opening and closing prices were precisely the same at the end of the period. It often presages a change in trend, more so on the daily charts, where you can see a Doji in the middle of this year's dollar top formation that appeared on Jan 29.
This morning a Doji appeared on the hourly study, not as powerful signal as on the daily, but always something to take note of, one appeared two day's ago at the onset of the European session, and presaged the low of 1.2100 that led to a rebound to 1.2200 by the time New York was in full swing. Today the Doji doesn't seem to be saying much however, other than the market is indecisive, isn't sure what way to go, and isn't sure whether this is the beginning of the end of the dollar pull back, or the end of the beginning.
On the weekly study a close here would be a second up week with a higher high, higher low, higher close, and has broken above the downtrend resistance that kicked in at 1.2150, and looking at that chart it is easy to be bullish. Funnily enough the fund manager that made that excellent EUR/USD top call the week before last is also suffering similar pangs.
Initially forecasting a two month dollar pull back they are wondering whether it may end in just another week or so. Meanwhile spot is exactly where it opened the New York session, 1.2187/90 and the 61.8% Fibo of 1.1995/1.2285 the most recent trading extremes comes in at 1.2175 and seems to be holding the sell off. Decisions, decisions.
This morning a Doji appeared on the hourly study, not as powerful signal as on the daily, but always something to take note of, one appeared two day's ago at the onset of the European session, and presaged the low of 1.2100 that led to a rebound to 1.2200 by the time New York was in full swing. Today the Doji doesn't seem to be saying much however, other than the market is indecisive, isn't sure what way to go, and isn't sure whether this is the beginning of the end of the dollar pull back, or the end of the beginning.
On the weekly study a close here would be a second up week with a higher high, higher low, higher close, and has broken above the downtrend resistance that kicked in at 1.2150, and looking at that chart it is easy to be bullish. Funnily enough the fund manager that made that excellent EUR/USD top call the week before last is also suffering similar pangs.
Initially forecasting a two month dollar pull back they are wondering whether it may end in just another week or so. Meanwhile spot is exactly where it opened the New York session, 1.2187/90 and the 61.8% Fibo of 1.1995/1.2285 the most recent trading extremes comes in at 1.2175 and seems to be holding the sell off. Decisions, decisions.
USD/JPY: Bullish Trend Intensity Signal Stalled
The bullish trend intensity signal on USD/JPY remains stalled for the fourth session at 15. The EUR/JPY trend signal is neutral and is consolidating, easing to 31. The EUR/USD trend signal is neutral and consolidating, easing to 23.
The GBP/USD trend signal is also neutral, easing to 20. The USD/CHF trend signal is neutral at trend-ready levels of 10. The EUR/GBP trend signal is neutral at trend-ready levels of 11. These proprietary indicators are updated each trading day after the NY close.
The GBP/USD trend signal is also neutral, easing to 20. The USD/CHF trend signal is neutral at trend-ready levels of 10. The EUR/GBP trend signal is neutral at trend-ready levels of 11. These proprietary indicators are updated each trading day after the NY close.
USD/JPY: Rising US Yields Add to USD/JPY Support
USD/JPY is currently trading at 120.12 with offers at 120.20 having stalled the morning rally. The latest surge in USD/JPY above 120.00 was aided not only by the cross demand by a rise in US bond yields in response to the stock market rally. US ten-year bond yields rose to 4.638%, up from 4.62% this morning.
The two-year yield spread of US bonds over JGBs remains range bound however, with the spread at 379 bp and within the range of 365-395 bp that has contained the spread in recent sessions. The inability of the yield spread to rise above 400 bp, a key psychological level, is one factor seen hampering recent USD/JPY attempts to sustain gains above 120.00. Japanese investors prefer to buy USD/JPY at lower levels, with bids seen staggered from 119.50 down to 119.00. USD/JPY offers remain at 120.50.
The two-year yield spread of US bonds over JGBs remains range bound however, with the spread at 379 bp and within the range of 365-395 bp that has contained the spread in recent sessions. The inability of the yield spread to rise above 400 bp, a key psychological level, is one factor seen hampering recent USD/JPY attempts to sustain gains above 120.00. Japanese investors prefer to buy USD/JPY at lower levels, with bids seen staggered from 119.50 down to 119.00. USD/JPY offers remain at 120.50.
Swiss Outlook (11th May 2007)
Into Europe and USD/CHF pivoted the 1.22 mark with bids into 1.2190/95 propping overnight dips. However, these were soon filled as the Franc continued to elicit support and 1.2177 traded before the price managed to find fresh support. More bids are seen into 1.2155/65 while 1.2195/2200 should cap. Technically, [EUR/CHF] has turned bearish after the close below trend-line support at 1.6475 yesterday.
The 21-Day M/A line at 1.6447 now caps rallies and should a close below this level be seen the downside should come under further pressure into next week. Currently the cross trades at 1.6430 having bounced off 1.6415 support. More bids are seen into 1.6405 with 1.6455/60 expected to cap. Looking ahead, another deluge of US data is set to impact the Dollar ahead of the weekend with only a break below 1.2150 adding pressure on the US unit.
At 12:30 GMT April Producer Price data and Retail Sales numbers are set for release, economists currently look for +0.6% & +0.4% readings. Following this the Commerce Dept. issues March Business Inventories at 14:00 GMT with weekly ECRI data set for unveiling at 14:30 GMT.
The 21-Day M/A line at 1.6447 now caps rallies and should a close below this level be seen the downside should come under further pressure into next week. Currently the cross trades at 1.6430 having bounced off 1.6415 support. More bids are seen into 1.6405 with 1.6455/60 expected to cap. Looking ahead, another deluge of US data is set to impact the Dollar ahead of the weekend with only a break below 1.2150 adding pressure on the US unit.
At 12:30 GMT April Producer Price data and Retail Sales numbers are set for release, economists currently look for +0.6% & +0.4% readings. Following this the Commerce Dept. issues March Business Inventories at 14:00 GMT with weekly ECRI data set for unveiling at 14:30 GMT.
Sterling Outlook (11th May 2007)
Cable plumbed one-month lows just shy of 1.9760 bids in early European trade, on the back of Eastern European GBP/JPY selling. More bids are tipped at 1.9750, with some stops sub-1.9750. A large 1.9700 option strike rolls off at today's 14:00GMT NY cut. 1.9771 was today's Asian session base.
1.9800 is now a resistance level. Stops below 1.9800 were tripped yesterday, following good size Middle Eastern selling of cable. Above-figure obstacles include 1.9815 (today's Asian session peak), 1.9830 and 1.9850.
Outgoing UK PM Tony Blair has endorsed Chancellor Gordon Brown as his successor (FT website). Blair will step down as PM on June 27.
EUR/GBP offers are touted at 0.6820, with some stops above. Earlier this week, a US investment house recommended going long at 0.6800, targeting 0.7000.
US April retail sales and producer price data is due at 12:30GMT. Retail sales forecast: +0.4% m/m, ex-autos +0.5% m/m. Headline PPI forecast: +0.6% m/m, +3.1% y/y. Core PPI forecast: +0.2% m/m, +1.8% y/y. March business inventories ensue at 14:00GMT. Forecast: +0.3% m/m.
1.9800 is now a resistance level. Stops below 1.9800 were tripped yesterday, following good size Middle Eastern selling of cable. Above-figure obstacles include 1.9815 (today's Asian session peak), 1.9830 and 1.9850.
Outgoing UK PM Tony Blair has endorsed Chancellor Gordon Brown as his successor (FT website). Blair will step down as PM on June 27.
EUR/GBP offers are touted at 0.6820, with some stops above. Earlier this week, a US investment house recommended going long at 0.6800, targeting 0.7000.
US April retail sales and producer price data is due at 12:30GMT. Retail sales forecast: +0.4% m/m, ex-autos +0.5% m/m. Headline PPI forecast: +0.6% m/m, +3.1% y/y. Core PPI forecast: +0.2% m/m, +1.8% y/y. March business inventories ensue at 14:00GMT. Forecast: +0.3% m/m.
Yen Outlook (11th May 2007)
The 140+ point fall in the Dow Thursday unsettled the Asian markets and brought the spotlight back on risk and carry trades. Yen short covering was a feature of the overnight session although price ranges for USD/JPY were fairly tight. Asian and U.S funds were active through late Thursday and into the Friday session with EUR/JPY, AUD/JPY and other Yen crosses hit by long liquidation.
Fresh speculation over Chinese rates sent the Yuan higher, which pushed the Yen higher still. A drop to 119.44-48 brought sub-119.50 stops into play but follow through was limited and the USD bounced strongly 119.80. Offers are reportedly camped in the 120.00-20 area with exporters bringing their sell interest closer to market. Further to the topside people are hearing of Asian central bank interest to off-load in the 120.50-60 area and stops are touted tight above.
USD/JPY has a 119.40 look about it with the Yen set to seek out a further advantage ahead of the U.S. retail sales data at 12:30 GMT. Producer prices and business inventories are also due later in the session.
Fresh speculation over Chinese rates sent the Yuan higher, which pushed the Yen higher still. A drop to 119.44-48 brought sub-119.50 stops into play but follow through was limited and the USD bounced strongly 119.80. Offers are reportedly camped in the 120.00-20 area with exporters bringing their sell interest closer to market. Further to the topside people are hearing of Asian central bank interest to off-load in the 120.50-60 area and stops are touted tight above.
USD/JPY has a 119.40 look about it with the Yen set to seek out a further advantage ahead of the U.S. retail sales data at 12:30 GMT. Producer prices and business inventories are also due later in the session.
Euro Outlook (11th May 2007)
Into the North American open and EUR/USD still trades near the 1.3475 point it has spent the day pivoting. Dealers continue to cite lacklustre trading and muted interest from the broader market while offers into the 1.3500/05 look to cap Euro stabs higher. However, thus far the price has struggled to even eke a push for 1.3490 as an eastern European continues to sell on strength.
Various interbank and fund names have sold in Europe but bids into 1.3465 prop ahead of 1.3450 support. Stops are seen below 1.3445 while on the topside stops are seen above 1.3520 and again on a break above 1.3540. Looking ahead, another deluge of US data is set to impact the Dollar ahead of the weekend with only a break below 1.3450 adding pressure on the EUR.
At 12:30 GMT April Producer Price data and Retail Sales numbers are set for release. Economists look for +0.6% & +0.4% readings. Following this the Commerce Dept. issues March Business Inventories at 14:00 GMT with weekly ECRI data set for unveiling at 14:30 GMT. Option traders note the 1.3485 expiry interest intraday with 1.3500 strikes also set to mature at the NY cut.
Various interbank and fund names have sold in Europe but bids into 1.3465 prop ahead of 1.3450 support. Stops are seen below 1.3445 while on the topside stops are seen above 1.3520 and again on a break above 1.3540. Looking ahead, another deluge of US data is set to impact the Dollar ahead of the weekend with only a break below 1.3450 adding pressure on the EUR.
At 12:30 GMT April Producer Price data and Retail Sales numbers are set for release. Economists look for +0.6% & +0.4% readings. Following this the Commerce Dept. issues March Business Inventories at 14:00 GMT with weekly ECRI data set for unveiling at 14:30 GMT. Option traders note the 1.3485 expiry interest intraday with 1.3500 strikes also set to mature at the NY cut.
Thursday, May 10, 2007
GBP/USD: Leveraged Names Selling but Absorbed Well
Dealers note solid selling from leveraged accounts in cable as European trading draws to a close, but the sales are being absorbed with relative ease. Some suggest reserve diversification may be at work with the pound trading at its lowest levels in almost a month despite a BOE rate hike today and recent signs that inflation is not yet abating.
Poor UK trade figures and an overwhelming long market position are two factors weighing on the pound today. The base of a channel comes in at 1.9800 today and was nearly tested earlier in the session. The top of that channel is now at 2.0020, not too far from yesterday's highs. 1.9880 is solid resistance on bounces intraday. Cable trades now at 1.9830.
Poor UK trade figures and an overwhelming long market position are two factors weighing on the pound today. The base of a channel comes in at 1.9800 today and was nearly tested earlier in the session. The top of that channel is now at 2.0020, not too far from yesterday's highs. 1.9880 is solid resistance on bounces intraday. Cable trades now at 1.9830.
EUR/USD: Old Lows in 1.3515/20 Area Containing Modest Rebounds
EUR/USD bounces have been very modest, barely to 1.3515, the old lows posted on Tuesday morning in the US. Subsequent lows in the 1.3520 area are also frustrating the EUR on rebounds near-term. Look for intraday shorts to quicken the pace of their covering if prices re-establish themselves above the 1.3520 level.
Prices have probed the 1.3500 level several times this morning but sovereign demand is scattered down toward 1.3480, dealers report. 1.3565 is pivotal resistance should EUR/USD rebound more forcefully later in the day.
Prices have probed the 1.3500 level several times this morning but sovereign demand is scattered down toward 1.3480, dealers report. 1.3565 is pivotal resistance should EUR/USD rebound more forcefully later in the day.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] has tested important multiple time frame supports at $674-75 today, backed up by major trendlines at $662.50-67.50. Inside week and month structure is in place and Trend Intensity has been slow to trigger any new trend signal of late. Still-bullish monthly trends are vulnerable below $675.
50-day simple moving averages at $674 were tapped at the day's lows. Momentum divergences have played out perfectly in this market so far, and a test of those major trendlines noted above is increasingly likely. Intraday resistance is distant at $681.
In [oil], bearish trend signals on Trend Intensity were reinvigorated with yesterday's break, though prices rebounded to midrange levels on the day by the close. The reaching of major supports in the $59-60 band has been a challenge, with developments in Nigeria helping keep the market from following through to the downside. Daily trends stay bearish below $61.70 Jun today, and weeklies are on track for a bearish shift next week.
Important monthly trends turned bullish at the end of April and lose that status if below $64.45 at this month's close. Daily resistance at $62.50 has already been tested at the highs today and has held but a push past would leave bears more vulnerable in the short term with prices then targeting $63.50 Jun.
50-day simple moving averages at $674 were tapped at the day's lows. Momentum divergences have played out perfectly in this market so far, and a test of those major trendlines noted above is increasingly likely. Intraday resistance is distant at $681.
In [oil], bearish trend signals on Trend Intensity were reinvigorated with yesterday's break, though prices rebounded to midrange levels on the day by the close. The reaching of major supports in the $59-60 band has been a challenge, with developments in Nigeria helping keep the market from following through to the downside. Daily trends stay bearish below $61.70 Jun today, and weeklies are on track for a bearish shift next week.
Important monthly trends turned bullish at the end of April and lose that status if below $64.45 at this month's close. Daily resistance at $62.50 has already been tested at the highs today and has held but a push past would leave bears more vulnerable in the short term with prices then targeting $63.50 Jun.
USD/JPY: Rate Outlook Uncertainty Continues
USD/JPY has had little pullback from the morning highs and remains bid around 120.47. A key factor seen behind USD/JPY support is the view that emerged in the Japanese press over Golden Week that JGB prices suggested that the BOJ will not raise rates until late this year, with only one more rate hike. However, there is speculation in a number of quarters that does not match this scenario.
A fund manager quoted by the IFR Markets JGB analyst in Tokyo suggests that the BOJ could hike as soon as next week's meeting, despite recent weak data. Other traders still see the chance of two BOJ rate hikes this year, and others see the likelihood that the Fed will actually hike this year on inflation concerns, giving the BOJ the window to hike rates as well. Upcoming data is not seen supporting any near term rate hike speculation however.
The latest coincident index was below the key boom-bust line for the third month in a row, and last night's Nikkei BOJ Watch column predicted that the April production data due on May 30, will be particularly week. However, the report does note that BOJ officials still remain upbeat on the economy.
A fund manager quoted by the IFR Markets JGB analyst in Tokyo suggests that the BOJ could hike as soon as next week's meeting, despite recent weak data. Other traders still see the chance of two BOJ rate hikes this year, and others see the likelihood that the Fed will actually hike this year on inflation concerns, giving the BOJ the window to hike rates as well. Upcoming data is not seen supporting any near term rate hike speculation however.
The latest coincident index was below the key boom-bust line for the third month in a row, and last night's Nikkei BOJ Watch column predicted that the April production data due on May 30, will be particularly week. However, the report does note that BOJ officials still remain upbeat on the economy.
Swiss Outlook (10th May 2007)
Into North American trading and there is a slew of US data for USD/CHF to negotiate. However, before the likes of April import-export prices and March international trade data (both at 12:30 GMT) can be seen the market will look to the rate verdicts from the BoE and the ECB.
Swiss traders may be pondering the scope for higher and more aggressive tightening from the SNB but the CHF is yet to elicit the support that the Pound and the Euro have managed to achieve.
The European morning started and finished with the option barriers at 1.2200 in focus. Protective offers into the 1.2190's kept the price at bay early-on before the upbeat Swiss data helped rally the Franc.
The data may have some looking for a more aggressive tone from the SNB but this failed to rally the CHF significantly and after the hawkish Fed the Dollar has garnered more support. The dip found only fresh buyers into 1.2155/60 to force a bounce with [EUR/CHF] only managing to eke slightly lower amid the Franc strength. Bids in the cross into 1.6465/70 remain key to further longer-term weakness.
Swiss traders may be pondering the scope for higher and more aggressive tightening from the SNB but the CHF is yet to elicit the support that the Pound and the Euro have managed to achieve.
The European morning started and finished with the option barriers at 1.2200 in focus. Protective offers into the 1.2190's kept the price at bay early-on before the upbeat Swiss data helped rally the Franc.
The data may have some looking for a more aggressive tone from the SNB but this failed to rally the CHF significantly and after the hawkish Fed the Dollar has garnered more support. The dip found only fresh buyers into 1.2155/60 to force a bounce with [EUR/CHF] only managing to eke slightly lower amid the Franc strength. Bids in the cross into 1.6465/70 remain key to further longer-term weakness.
Sterling Outlook (10th May 2007)
Liquidation of long GBP positions ahead of the looming BoE MPC base rate verdict has been blamed for sterling's London morning slump to a six-day low of 1.9850. The MPC is expected to hike the UK base rate by 25bp to 5.5% at 11:00GMT. A brief statement of explanation will accompany.
Touted support points south of 1.9850 include 1.9840, 1.9825 and 1.9800. 1.9805, 1.9790 and 1.9775 option strikes roll off at today's 14:00GMT NY cut. GBP/USD resistance levels include 1.9890, 1.9900, 1.9929 (today's Asian session base), 1.9964 (today's early Europe high), 1.9975 and 2.0000 (yesterday's 8-day peak). 2.0000 and 2.0100 option strikes also expire today.
Tony Blair has arrived in his Sedgefield constituency where he will make public his plans to stand down as Labour leader and PM (BBC website). Chancellor Gordon Brown is expected to succeed Blair as PM in late June/early July.
UK industrial production was weaker-than-expected in March. The UK trade deficit also widened. The size of March's US trade deficit will be disclosed at 12:30GMT. Forecast: $60.0bn.
Touted support points south of 1.9850 include 1.9840, 1.9825 and 1.9800. 1.9805, 1.9790 and 1.9775 option strikes roll off at today's 14:00GMT NY cut. GBP/USD resistance levels include 1.9890, 1.9900, 1.9929 (today's Asian session base), 1.9964 (today's early Europe high), 1.9975 and 2.0000 (yesterday's 8-day peak). 2.0000 and 2.0100 option strikes also expire today.
Tony Blair has arrived in his Sedgefield constituency where he will make public his plans to stand down as Labour leader and PM (BBC website). Chancellor Gordon Brown is expected to succeed Blair as PM in late June/early July.
UK industrial production was weaker-than-expected in March. The UK trade deficit also widened. The size of March's US trade deficit will be disclosed at 12:30GMT. Forecast: $60.0bn.
Yen Outlook (10th May 2007)
USD/JPY remains trapped in a 119.50-120.50 range. Asia saw the pair trade up early on the back of Japanese importer settlement demand going into the Tokyo fix and a more hawkish-than-expected Fed overnight. It traded up to 120.24 early before easing off. Helping the pair to move back down was a rash of offers from Japanese exporter and option players ahead of barriers at 120.50.
There was also talk of residual repatriation flows from a semi-governmental entity ahead of large US coupon payments on the 15th. Bids returned below 120.00 however with the downside limited to 119.95. EUR/JPY traded similarly, up to 162.74 early before easing to 162.35. Although some apprehension can still be felt ahead of tonight's ECB rate decision (no change) and ECB President Trichet's press conference (to signal a hike in June), dealers see the cross well bid around 162.00 and maybe poised to trade higher.
Purchases below the Ichimoku tenkan line, today at 162.76, have proved profitable since mid-March. AUD/JPY traded up on the back of strong jobs data, from 99.34 to 99.88. Profit-takers look to cap it around 100.00 for now.
There was also talk of residual repatriation flows from a semi-governmental entity ahead of large US coupon payments on the 15th. Bids returned below 120.00 however with the downside limited to 119.95. EUR/JPY traded similarly, up to 162.74 early before easing to 162.35. Although some apprehension can still be felt ahead of tonight's ECB rate decision (no change) and ECB President Trichet's press conference (to signal a hike in June), dealers see the cross well bid around 162.00 and maybe poised to trade higher.
Purchases below the Ichimoku tenkan line, today at 162.76, have proved profitable since mid-March. AUD/JPY traded up on the back of strong jobs data, from 99.34 to 99.88. Profit-takers look to cap it around 100.00 for now.
Euro Outlook (10th May 2007)
At 11:45 GMT the ECB delivers their latest verdict on Euro Zone rates. However, the central bank is expected to leave rates on hold at 3.75% and once again it will be the accompanying press conference that drives the short-term volatility in EUR/USD. The post-decision conference kicks off at 12:30 GMT and the market awaits a Trichet rubber-stamp for a June 25bps hike.
Economists expect the ECB to signal such a move by stating the council will be "vigilant" on price risks, a key word typically used to indicate an imminent rate hike. The market may have priced in this result and for the Euro uptrend to remain in play some suggest the rate path beyond the June meeting may need to be touched upon given the slight hawkish-tone to the Fed overnight. The impending ECB event-risk has keep the EUR supported on dips intraday with Euro crosses also benefiting from renewed EUR buying.
EUR/USD rallied to re-test the 1.3565 level but the failure to push any higher soon resulted in a drop back to 1.3520 support. Central bank sellers are seen into 1.3570 with spot needing to outside the broader 1.35/36 range before further direction is found.
Economists expect the ECB to signal such a move by stating the council will be "vigilant" on price risks, a key word typically used to indicate an imminent rate hike. The market may have priced in this result and for the Euro uptrend to remain in play some suggest the rate path beyond the June meeting may need to be touched upon given the slight hawkish-tone to the Fed overnight. The impending ECB event-risk has keep the EUR supported on dips intraday with Euro crosses also benefiting from renewed EUR buying.
EUR/USD rallied to re-test the 1.3565 level but the failure to push any higher soon resulted in a drop back to 1.3520 support. Central bank sellers are seen into 1.3570 with spot needing to outside the broader 1.35/36 range before further direction is found.
Wednesday, May 09, 2007
US TECHS: S&P Outlook
Traders remain very anxious to buy into the market, utilizing the rare setback to pick up positions. Yesterday's early dip found buying interest by mid-morning, a consistent pattern of late (when the market has been able to trade down).
The cash S&P is well over 100 points above its 200-day moving average, not an all-time high but historically a rich premium and at its most overbought point on oscillator studies since January of 2004. Cycle work does not urge caution (on the bullish side) until closer to mid-June based on historical patterns.
Weekly supports noted at 1492-94 have not come close to being hit this week, but the market did approach monthly resistance at 1520. A break of either would carry prices close to 10 points. Daily and intraday supports are in the 1506-08 zone, with the midpoint of recent hourly trading down at 1499 Jun. First daily resistance is at 1512.00-50, then 1515.50-1517.00.
The cash S&P is well over 100 points above its 200-day moving average, not an all-time high but historically a rich premium and at its most overbought point on oscillator studies since January of 2004. Cycle work does not urge caution (on the bullish side) until closer to mid-June based on historical patterns.
Weekly supports noted at 1492-94 have not come close to being hit this week, but the market did approach monthly resistance at 1520. A break of either would carry prices close to 10 points. Daily and intraday supports are in the 1506-08 zone, with the midpoint of recent hourly trading down at 1499 Jun. First daily resistance is at 1512.00-50, then 1515.50-1517.00.
GBP/USD: Buy Stops Tripped, 1.9970 Offers Under Threat
Tripped buy stops have helped inflate cable to 2-day highs just shy of 1.9970 a level at which sell interest is tipped. Additional offers were formerly flagged at 1.9980 and 2.0000.
Helping underpin the pound is the risk that the BoE MPC might raise the UK base rate by 50bp to 5.75% at 11:00GMT tomorrow. A 25bp hike to 5.5% is expected. 1.9941 (yesterday's NY session peak) is now a support point. Lower props include 1.9910 and 1.9880.
Helping underpin the pound is the risk that the BoE MPC might raise the UK base rate by 50bp to 5.75% at 11:00GMT tomorrow. A 25bp hike to 5.5% is expected. 1.9941 (yesterday's NY session peak) is now a support point. Lower props include 1.9910 and 1.9880.
EUR/USD: Jawboning Gives EUR Modest Lift
USD/JPY is leading the way lower for the greenback with some jawboning from the EU's Juncker helping fuel the move. He suggests that JPY rates do not reflect economic fundamentals.
EUR/JPY is slipping as well, making EUR/USD a slow grind to the topside. Juncker further notes that a continued strong EUR could hurt exports. Offers are seen in the 1.3555/60 region with a few small stops sprinkled above 1.3565. EUR/USD trades at 1.3546.
EUR/JPY is slipping as well, making EUR/USD a slow grind to the topside. Juncker further notes that a continued strong EUR could hurt exports. Offers are seen in the 1.3555/60 region with a few small stops sprinkled above 1.3565. EUR/USD trades at 1.3546.
USD/CHF: 1.22 Intact As Spot Eases Back, 1.2155/65 Support Key
The 1.22 level remains intact in USD/CHF with the option barriers still in play the pair eases back once more. Bids into 1.2165/70 will initially look to stall the dip. Below the intraday low at 1.2165 the pullback low from late European trading yesterday sits at 1.2155. As a result of this 1.2155/65 is seen a broader zone of support with bids lining up in this band to protect the Dollar into Fed verdict.
Only a break below the lower level will add momentum with a push below 1.2145 putting the price into stop/loss territory. Should this scenario occur then a retracement to 1.2100/05 area will be looked for by bears. A break under the 61.8% Fibo, of the rally yesterday (from 1.2102 to 1.2195), at 1.2138 signals such a move.
Only a break below the lower level will add momentum with a push below 1.2145 putting the price into stop/loss territory. Should this scenario occur then a retracement to 1.2100/05 area will be looked for by bears. A break under the 61.8% Fibo, of the rally yesterday (from 1.2102 to 1.2195), at 1.2138 signals such a move.
Swiss Outlook (9th May 2007)
The Franc never really took note of the comments from the Swiss Economy Minister that few in the mountain economy are worried over Franc weakness. Intraday and the CHF managed to elicit a modicum of support into European trading ahead of the re-opening of the local 2017 4.25% bond auction. The Federal Treasury sold CHF 665Mln according to the recent results but USD/CHF failed to break below the key 1.2155/60 support level.
Spot bounced off 1.2165 and local dealers cite EUR/CHF buying as "having impacted the Dollar pair". However, standing offers into the 1.2180's and 90's continue to stall the hopes of a run at the 1.2200 option barriers with the US unit generally seen in a consolidative mood ahead of the FOMC. EUR/CHF in contrast now looks capped by the 1.6495 & 1.6500 option strikes set for expiry today (NY cut at 14:00 GMT).
US data is set for release into NorAm trading but the 11:00 mortgage data and the 15:30 GMT Transportation Services Index have been overshadowed by the 18:15 GMT verdict from the latest one-day FOMC meeting. No change is expected but the Bernanke comments are being keenly awaited by the FX markets.
Spot bounced off 1.2165 and local dealers cite EUR/CHF buying as "having impacted the Dollar pair". However, standing offers into the 1.2180's and 90's continue to stall the hopes of a run at the 1.2200 option barriers with the US unit generally seen in a consolidative mood ahead of the FOMC. EUR/CHF in contrast now looks capped by the 1.6495 & 1.6500 option strikes set for expiry today (NY cut at 14:00 GMT).
US data is set for release into NorAm trading but the 11:00 mortgage data and the 15:30 GMT Transportation Services Index have been overshadowed by the 18:15 GMT verdict from the latest one-day FOMC meeting. No change is expected but the Bernanke comments are being keenly awaited by the FX markets.
Sterling Outlook (9th May 2007)
The BoE MPC is expected to raise the UK base rate by 25bp to 5.5% at midday BST tomorrow (Thursday). There is more risk of a 50bp hike as advocated by four "Shadow" MPC members, than no change.
GBP/USD rallied to an intra-day peak of 1.9935, with EUR/GBP revisiting yesterday's 0.6792 two-week low, after the BRC disclosed that annualized UK shop price inflation rose to 0.8% in April from an upwardly revised 0.7% in March.
1.9910 (today's Asian session top) is now a sterling support point. Lower props include 1.9880 (yesterday's low), 1.9870, 1.9840/50 and 1.9825. Resistance levels north of 1.9935/40 are located at 1.9970/80 and 2.0000.
Following yesterday's ceremony at Stormont to mark the return of power-sharing to Northern Ireland, Tony Blair is expected to announce today or tomorrow that he is standing down as Labour leader and PM. Chancellor Gordon Brown is expected to succeed Blair as PM in late June/early July.
Today's key event risk is the 18:15GMT FOMC statement to accompany an (expected) unchanged Fed funds rate verdict.
GBP/USD rallied to an intra-day peak of 1.9935, with EUR/GBP revisiting yesterday's 0.6792 two-week low, after the BRC disclosed that annualized UK shop price inflation rose to 0.8% in April from an upwardly revised 0.7% in March.
1.9910 (today's Asian session top) is now a sterling support point. Lower props include 1.9880 (yesterday's low), 1.9870, 1.9840/50 and 1.9825. Resistance levels north of 1.9935/40 are located at 1.9970/80 and 2.0000.
Following yesterday's ceremony at Stormont to mark the return of power-sharing to Northern Ireland, Tony Blair is expected to announce today or tomorrow that he is standing down as Labour leader and PM. Chancellor Gordon Brown is expected to succeed Blair as PM in late June/early July.
Today's key event risk is the 18:15GMT FOMC statement to accompany an (expected) unchanged Fed funds rate verdict.
Yen Outlook (9th May 2007)
Tokyo offers in the 120.00 area continue to frustrate the bull market and exporter interest is reportedly thick between 120.00 and 120.30. Weight from the options market has also been a feature as barrier plays, although off the pace at 120.50, continue to take the edge off any Dollar rebound.
On the buy side patchy interest from U.S names has stalled early European weakness at 119.70-75 and there is further talk of reasonable bids from Japanese institutional and retail investors including semi-governmental agencies down to 119.50. Light stops are touted below the 119.50 level, which is also where the Ichimoku Tenken line comes in today. On the option front there are a number of large expiries today, see story timed at 06:59 GMT. The largest of which is an estimated USD 250 mln 120.00 strike.
On the wide we are looking for a 119.60 to 120.10 European morning range but the price band is likely to be far tighter with action focused on a 119.80 pivot. EUR/JPY has also traded tight with 162.15 to 162.50 on the wide. Stops are touted under 162.00 and 161.80.
On the buy side patchy interest from U.S names has stalled early European weakness at 119.70-75 and there is further talk of reasonable bids from Japanese institutional and retail investors including semi-governmental agencies down to 119.50. Light stops are touted below the 119.50 level, which is also where the Ichimoku Tenken line comes in today. On the option front there are a number of large expiries today, see story timed at 06:59 GMT. The largest of which is an estimated USD 250 mln 120.00 strike.
On the wide we are looking for a 119.60 to 120.10 European morning range but the price band is likely to be far tighter with action focused on a 119.80 pivot. EUR/JPY has also traded tight with 162.15 to 162.50 on the wide. Stops are touted under 162.00 and 161.80.
Euro Outlook (9th May 2007)
The Fed today begins their one-day meeting but the markets have priced in an unchanged verdict from the Bernanke-led FOMC at the 18:15 GMT release. However, many expect to gain further clues on the path of US inflation from the rhetoric used and as a result the potential for any rate moves into H2 could be unveiled.
EUR/USD has traded on a steady footing for the majority of the day with the Asian 1.3535/55 range only marginally extended by European position adjusting to 1.3530/60. Dealers now look for spot to trade a rough 1.3525/75 band ahead of this central bank event-risk with the broader 1.35/36 range said to give the price more directional clues. With the ECB also set to report on rates this week (Thursday 11:45 GMT) this range may prevail for now.
Should spot break below 1.3530/35 support in the short-run then 1.3515/20 will be eyed with stops reported below here before the 1.3500 level comes into view. Central bank and Sovereign names have been reported to be protecting this level with larger stops noted below. Elsewhere, option dealers note expiries at 1.3500 intraday (NY cut at 14:00 GMT) that should help fortify the downside.
EUR/USD has traded on a steady footing for the majority of the day with the Asian 1.3535/55 range only marginally extended by European position adjusting to 1.3530/60. Dealers now look for spot to trade a rough 1.3525/75 band ahead of this central bank event-risk with the broader 1.35/36 range said to give the price more directional clues. With the ECB also set to report on rates this week (Thursday 11:45 GMT) this range may prevail for now.
Should spot break below 1.3530/35 support in the short-run then 1.3515/20 will be eyed with stops reported below here before the 1.3500 level comes into view. Central bank and Sovereign names have been reported to be protecting this level with larger stops noted below. Elsewhere, option dealers note expiries at 1.3500 intraday (NY cut at 14:00 GMT) that should help fortify the downside.
Tuesday, May 08, 2007
USD/JPY: Going Nowhere Fast, More Ranging Eyed Today
USD/JPY did very little overnight, holding in a tight 119.85-120.12 range during the course of the New York day. No fireworks were seen in London-less European trading either. The focus looks to be well away from JPY pairs with M&A action elsewhere and stock market rallies taking the spotlight. This likely to continue to be the case, USD/JPY looks set to see another range trade.
At 120.06/09, the pair remains bracketed by offers above from the 120.20-30 level and trailing up to option barriers at 120.50 and above. Stops are seen above 120.80 but more offers from Japanese exporters are likely above. To the downside, bidding interest remains from the 119.80 area down towards 119.50. Various players are tipped below, including Japanese institutional investors, including life insurers and semi-governmental entities, as well as importers looking to buy into dips.
In an interesting footnote, some foreign players look to be better JPY buyers than sellers. A number are seen net short Japanese stocks, and have to buy back ahead of month-end. Moves out of some carry trades may be seen as JPY is bought back in this regard.
At 120.06/09, the pair remains bracketed by offers above from the 120.20-30 level and trailing up to option barriers at 120.50 and above. Stops are seen above 120.80 but more offers from Japanese exporters are likely above. To the downside, bidding interest remains from the 119.80 area down towards 119.50. Various players are tipped below, including Japanese institutional investors, including life insurers and semi-governmental entities, as well as importers looking to buy into dips.
In an interesting footnote, some foreign players look to be better JPY buyers than sellers. A number are seen net short Japanese stocks, and have to buy back ahead of month-end. Moves out of some carry trades may be seen as JPY is bought back in this regard.
USD/CHF: Stops Run As Dollar Guns For 1.2200 Barriers
USD/CHF has run stops in the break above 1.2185 and the pair is now gunning for the barriers at 1.2200. 1.2195 has printed as the fresh session and intraday high but thus far the pair has failed to eclipse the option related sales into the options.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] is lower today and the market is facing daily momentum issues once more. Peak readings set in late February haven't been re-approached, either at the April 20 price top nor yesterday. The non-confirm, in line with weak showings in related markets (silver, XAU, HUI) raises concerns that the whole period since last July's top has traced out a large rising wedge that is set to resolve to the downside with the steady failure(s) to penetrate the $700 region.
Long-term uptrends are at $661.50-67.50 today, not at risk of being reached but worth monitoring for signs of weakness. Weekly/monthly supports at $675 would have to give way first, of course. Trend Intensity, IFR's proprietary trend indicator, has been slow to fire (bullishly) and remains stalled at neutral. A sub-$687 close today sends daily trends on another model back to neutral.
In [oil], with the setting of a new bearish Trend Intensity signal last Friday, near-term bounces should be viewed as selling opportunities. The multiple time frame zone of support mentioned on Monday at $59-60 remains a target. Daily chart resistance is approximately $62.00-50. Yesterday's lows reached 50% retracement targets of 2007 range at $60.90; key 62% measures are a shade below $59.
Long-term uptrends are at $661.50-67.50 today, not at risk of being reached but worth monitoring for signs of weakness. Weekly/monthly supports at $675 would have to give way first, of course. Trend Intensity, IFR's proprietary trend indicator, has been slow to fire (bullishly) and remains stalled at neutral. A sub-$687 close today sends daily trends on another model back to neutral.
In [oil], with the setting of a new bearish Trend Intensity signal last Friday, near-term bounces should be viewed as selling opportunities. The multiple time frame zone of support mentioned on Monday at $59-60 remains a target. Daily chart resistance is approximately $62.00-50. Yesterday's lows reached 50% retracement targets of 2007 range at $60.90; key 62% measures are a shade below $59.
EUR/USD: Crashes through 1.3530/35; 1.3520 Holds
EUR/USD selling snowballed a short while ago, rapidly slipping from the low 1.3550s to 1.3520, a colossal move given low volatility markets of late. Long liquidation is the theme today with no fundamental particular catalysts noted. 1.3520 support is key as a further crop of stops lie just below. 1.3480 is a target on a 1.3520 break. 1.3545/50 offers lie above the market which trades at 1.3524.
USD/JPY: Bullish Trend Intensity Signal Advances
The USD/JPY bullish trend intensity signal advanced a notch to 15. The EUR/USD trend signal is neutral and consolidating, easing to 28. The GBP/USD trend signal is also neutral, easing to 23. The USD/CHF trend signal is neutral, easing to 10 and is at trend-ready levels.
The EUR/JPY bullish trend signal advanced a notch to 35 and is now at mature levels where trends often fail. The EUR/GBP trend signal is stalled at 12 which is also trend-ready levels. These proprietary indicators are updated each trading day after the NY close.
The EUR/JPY bullish trend signal advanced a notch to 35 and is now at mature levels where trends often fail. The EUR/GBP trend signal is stalled at 12 which is also trend-ready levels. These proprietary indicators are updated each trading day after the NY close.
EUR/USD: No Rally Despite Soggy Stocks, Real Estate Forecast
EUR/USD remains under pressure despite a decent sell off in US equities, a rarity these days, and a downward revision to National Association of Realtors home sales forecast. They see 2007 sales falling 2.9%, a revision of an earlier 2.2% forecasted decline.
EUR crosses are seeing significant profit-taking today, weighing heavy on the single currency. EUR/GBP is back below 0.6800 with M&A flows and fears of a 50 bp hike from the BOE providing a bid while EUR/JPY is down on pure position squaring.
Dealers continue to express willingness to buy EUR/USD on dips with tight stops below 1.3520. Small stops are seen just below the 1.3535 area lows posted Thursday afternoon. EUR/USD trades at 1.3544.
EUR crosses are seeing significant profit-taking today, weighing heavy on the single currency. EUR/GBP is back below 0.6800 with M&A flows and fears of a 50 bp hike from the BOE providing a bid while EUR/JPY is down on pure position squaring.
Dealers continue to express willingness to buy EUR/USD on dips with tight stops below 1.3520. Small stops are seen just below the 1.3535 area lows posted Thursday afternoon. EUR/USD trades at 1.3544.
Swiss Outlook (8th May 2007)
Into European action and spot bounced as support into the 1.2100/05 area kept the Dollar on the front-foot. Model and interbank buyers have continued to support the pair with 1.2135 and 1.2145/50 offers easily absorbed amid the morning move higher. Cross buying has helped prop the pair with offers from 1.2170 back to 1.2185 now attempting to curb further strength. Option barriers are noted above into 1.2200.
[EUR/CHF] was bought back into the 1.6500's into European trading with 1.6507 printing before fresh offers emerged to steady the pair near the 1.6500 mark where option expiries are noted today. Looking ahead, the FOMC may be weighing on broader sentiment but intraday and there are still event-risks in the pipeline.
12:55 GMT sees the Redbook release Retail Sales Index while at 14:00 GMT the Commerce Department releases wholesale inventories for March. Economists forecast a +0.4% reading on the month while after the European close the ISM unveil their semiannual forecasts. Local dealers note a key speech tomorrow from the SNB board member Jordan and the monthly Swiss bond auction results.
[EUR/CHF] was bought back into the 1.6500's into European trading with 1.6507 printing before fresh offers emerged to steady the pair near the 1.6500 mark where option expiries are noted today. Looking ahead, the FOMC may be weighing on broader sentiment but intraday and there are still event-risks in the pipeline.
12:55 GMT sees the Redbook release Retail Sales Index while at 14:00 GMT the Commerce Department releases wholesale inventories for March. Economists forecast a +0.4% reading on the month while after the European close the ISM unveil their semiannual forecasts. Local dealers note a key speech tomorrow from the SNB board member Jordan and the monthly Swiss bond auction results.
Sterling Outlook (8th May 2007)
Sell interest is tipped within a 1.9970/80 window. Upper obstacles include 2.0000, 2.0075 (May 1 high) and 2.0100. 1.9964 was today's Asian session top. Sterling support points include 1.9916 (European morning, intra-day low), 1.9900, 1.9870/80 and 1.9845/50.
The BoE MPC is expected to raise the UK base rate by 25bp to 5.5% on Thursday although four "Shadow" MPC members advocate a 50bp hike (Sunday Times). The FOMC is expected to keep the Fed funds rate at 5.25% tomorrow (Wednesday), with its accompanying statement of prime interest.
EUR/GBP ran into resistance just shy of 0.6829 (yesterday's high) in early European trade. Rumoured selling of EUR/USD by European Central Banks, plus disappointing German industrial production data, has been blamed for its subsequent drop to six-day lows just shy of 0.6800. Some sell stops are tipped below 0.6800. The cross last traded sub-0.6800 a fortnight ago (Apr 24).
Annualized UK wage growth eased to 3.6% in April, from 3.7% in March, according to the Voca take home pay index.
The BoE MPC is expected to raise the UK base rate by 25bp to 5.5% on Thursday although four "Shadow" MPC members advocate a 50bp hike (Sunday Times). The FOMC is expected to keep the Fed funds rate at 5.25% tomorrow (Wednesday), with its accompanying statement of prime interest.
EUR/GBP ran into resistance just shy of 0.6829 (yesterday's high) in early European trade. Rumoured selling of EUR/USD by European Central Banks, plus disappointing German industrial production data, has been blamed for its subsequent drop to six-day lows just shy of 0.6800. Some sell stops are tipped below 0.6800. The cross last traded sub-0.6800 a fortnight ago (Apr 24).
Annualized UK wage growth eased to 3.6% in April, from 3.7% in March, according to the Voca take home pay index.
Yen Outlook (8th May 2007)
Japanese exporters have had the run of the market in recent sessions and have helped to keep the USD contained. A combination of corporate sell orders and option sales helped push USD/JPY down to 119.70 late in the Asian session and it took reasonable demand from U.S names in Europe and small short covering from Asia to drive the Buck back to 119.97-99.
Option defense remains a problem for the Dollar with 120.50, 121.00 and 121.50 barrier plays touted. There are also some 120.00 vanillas rolling off at today's New York cut. On the buy side and some distance from market there are rumours of sizeable Japanese agency bids and importer business in the low 119's. A little closer to home there is talk of institutional investor bids and semi-government USD demand between 119.50-119.70. Also hearing of stops under 119.45.
Last session's 120.15 highs serving as initial resistance and the overnight 119.70 low providing the support. The bigger picture is beginning to fall the Yen's way with a USD top in place at 120.45 and a brief USD/JPY break under the 10-day moving average, today at 119.80.
Option defense remains a problem for the Dollar with 120.50, 121.00 and 121.50 barrier plays touted. There are also some 120.00 vanillas rolling off at today's New York cut. On the buy side and some distance from market there are rumours of sizeable Japanese agency bids and importer business in the low 119's. A little closer to home there is talk of institutional investor bids and semi-government USD demand between 119.50-119.70. Also hearing of stops under 119.45.
Last session's 120.15 highs serving as initial resistance and the overnight 119.70 low providing the support. The bigger picture is beginning to fall the Yen's way with a USD top in place at 120.45 and a brief USD/JPY break under the 10-day moving average, today at 119.80.
Euro Outlook (8th May 2007)
EUR/USD failed at 1.3623 into European action and the price had soon been sold back to the 1.36 mark. Bids into 1.3585/90 level from option buyers and an Eastern European player were seen protecting the 1.3590 strike but as dealers talked of European central bank selling the EUR downward momentum accelerated.
Euro cross sales (EUR/JPY in particular) weighed on EUR/USD and spot removed stops in the break below 1.3580 with 1.3570 support stalling the pair into the German data. However, a weaker than expected release saw the Euro re-sold with Asian central bank and option related bids into the 1.3550 area now seen supporting the price ahead of the NorAm open. Option dealers also note another expiry at 1.3550 intraday.
Looking ahead, the FOMC may be weighing on broader sentiment but intraday and there are still event-risks in the pipeline. 12:55 GMT sees the Redbook release Retail Sales Index while at 14:00 GMT the Commerce Department releases wholesale inventories for March. Economists forecast a +0.4% reading on the month while after the European close the ISM unveil their semiannual forecasts.
Euro cross sales (EUR/JPY in particular) weighed on EUR/USD and spot removed stops in the break below 1.3580 with 1.3570 support stalling the pair into the German data. However, a weaker than expected release saw the Euro re-sold with Asian central bank and option related bids into the 1.3550 area now seen supporting the price ahead of the NorAm open. Option dealers also note another expiry at 1.3550 intraday.
Looking ahead, the FOMC may be weighing on broader sentiment but intraday and there are still event-risks in the pipeline. 12:55 GMT sees the Redbook release Retail Sales Index while at 14:00 GMT the Commerce Department releases wholesale inventories for March. Economists forecast a +0.4% reading on the month while after the European close the ISM unveil their semiannual forecasts.
Monday, May 07, 2007
EUR/USD: EU's Almunia- Sharp Fall in EUR Could Cause Problems
Far from talking down the EUR, EU economics czar Almunia says a shaper fall in the EUR could cause majors problems, according to Thomson Financial News. Presumably, he is talking about a rapid unwinding of the carry trade, but the context is unclear. He says the euro zone economic situation is better than expected. EUR/USD trades quietly at 1.3617, running into offers in the low 1.3620s.
USD/CHF: Bears Hold The High Ground As Greenback Grinds Lower
USD/CHF has traded heavy since the New York open, however low volumes have muted the extent of the slide. Spot touched an overnight high of 1.2110 in late European trading, as early bird New Yorkers arrived at their desks and decided to get a jump on the day.
Overall levels are little changed from Friday's New York close, and US traders are not looking for much in the way of action with little in the way of US statistics, and London closed. Overall the market remains bearish and is looking for better levels to sell, with good offers from 1.2110 up to 1.2150.
Overall levels are little changed from Friday's New York close, and US traders are not looking for much in the way of action with little in the way of US statistics, and London closed. Overall the market remains bearish and is looking for better levels to sell, with good offers from 1.2110 up to 1.2150.
GBP/USD: Failing to Keep Pace
The USD has taken on a soft tone across the board this morning but the pound is lagging the pace. Word of a fresh $4.1 bln US-bound M&A deal may be helping keep a lid on Sterling. Dealers also noted talk of Asian and Middle Eastern selling interest into strength this morning helping put a near-term top in place before the US open.
A quarter-point BOE hike is baked in the cake for Thursday though there is some hope from GBP bulls that a 50 bp hike may be in the works. Given the BOE's repeated forecasts for a sharp fall in inflation later this year, a 50 bp hike seems a bit aggressive to us. Small bids are at 1.9950 but trailing stops are eyed around 1.9945. Given thin Bank Holiday conditions, they look a bit vulnerable.
A quarter-point BOE hike is baked in the cake for Thursday though there is some hope from GBP bulls that a 50 bp hike may be in the works. Given the BOE's repeated forecasts for a sharp fall in inflation later this year, a 50 bp hike seems a bit aggressive to us. Small bids are at 1.9950 but trailing stops are eyed around 1.9945. Given thin Bank Holiday conditions, they look a bit vulnerable.
EUR/USD: Holding Ground; Wall Street Opens Firm
EUR/USD is consolidating gains around 1.3620 after breaking higher earlier in New York trade. Forex markets are concerned that the Fed may shift their bias to neutral at midweek but the equity markets in the US seem to be celebrating that same potential.
Offers are eyed toward 1.3640/50 near-term, while bids have inched up to 1.3605/10. Small stops from intraday players lie just below 1.3600, guarding against a failed break out.
Offers are eyed toward 1.3640/50 near-term, while bids have inched up to 1.3605/10. Small stops from intraday players lie just below 1.3600, guarding against a failed break out.
Swiss Outlook (7th May 2007)
The slow start to the week has kept Franc trading choppy. Overnight and the Franc elicited support as the Yen gained while into early European trading it was anticipation of the Swiss data that spurred macro buying of the CHF. The unit rallied against both the EUR and USD but the gains were short-lived as unemployment remained unchanged at 2.9%.
Profits were quickly booked and USD/CHF has since steadied around the 1.21 area. Buying in EUR/CHF continues to support the price but cross offers trail from 1.6480 back to 90. Intraday and the risk-profile is shaped by the 18:30 GMT comments from Former Federal Reserve Chairman Alan Greenspan and the 19:00 GMT release of March US consumer credit data (USD 4.5Bln expected).
Local dealers may be keeping one eye on the Wednesday FOMC verdict but the day also notes a key speech from the SNB board member Jordan and the monthly Swiss bond auction. The Swiss central bank speaker will have his comments scrutinized for further clues on interest rate policy and second-quarter consumer sentiment data due on Thursday.
Profits were quickly booked and USD/CHF has since steadied around the 1.21 area. Buying in EUR/CHF continues to support the price but cross offers trail from 1.6480 back to 90. Intraday and the risk-profile is shaped by the 18:30 GMT comments from Former Federal Reserve Chairman Alan Greenspan and the 19:00 GMT release of March US consumer credit data (USD 4.5Bln expected).
Local dealers may be keeping one eye on the Wednesday FOMC verdict but the day also notes a key speech from the SNB board member Jordan and the monthly Swiss bond auction. The Swiss central bank speaker will have his comments scrutinized for further clues on interest rate policy and second-quarter consumer sentiment data due on Thursday.
Sterling Outlook (7th May 2007)
A thin start for the Cable market in London with volumes understandably low and interest down on a normal Monday. Sterling has had a good run higher since Friday's U.S Payroll disappointment and Asia carried the baton to 1.9970 before Europe picked up the pace.
European names were seen squeezing the market to 1.9975 but Asian and Middle East offers have capped the bounce at the highs. A modest pullback to 1.9960 found fresh demand out of Europe a Paris name has reportedly helped nudge the Pound back to 1.9973. Consolidation now the theme as the early activity looks to have sapped momentum from the market.
The charts look good for another 2.00 test this week but we expect to see a slower pace above the figure with profit taking ahead of this week's U.K rate decision. There is enough uncertainty surrounding the MPC meeting to force profit taking in the direction of the expected 1/4-point hike. However, with U.K interest rates expected to rise above Fed Funds for the first time in a while the Pound should be able to hold an advantage this week.
European names were seen squeezing the market to 1.9975 but Asian and Middle East offers have capped the bounce at the highs. A modest pullback to 1.9960 found fresh demand out of Europe a Paris name has reportedly helped nudge the Pound back to 1.9973. Consolidation now the theme as the early activity looks to have sapped momentum from the market.
The charts look good for another 2.00 test this week but we expect to see a slower pace above the figure with profit taking ahead of this week's U.K rate decision. There is enough uncertainty surrounding the MPC meeting to force profit taking in the direction of the expected 1/4-point hike. However, with U.K interest rates expected to rise above Fed Funds for the first time in a while the Pound should be able to hold an advantage this week.
Yen Outlook (7th May 2007)
Tokyo markets return and the Golden week holiday appears to have improved sentiment to the embattled Yen and Japanese markets generally. USD/JPY has slipped from early Asian highs around 120.15 to 119.80-85. A short squeeze into the Asian close provided Europe with better selling levels and a drop from 120.00 to 119.80 witnessed.
Exporters, who were active, right through last week's holiday period, have again dominated the sell side with offers touted from 120.00 through 120.20. Sources suggest there is a degree of bid chasing helping to shape the early European offered tone with orders being left closer and closer to market. Option related selling also a factor at play so far this session.
On the buy side the main bids are reportedly camped close to 119.50. The smaller interest between 119.70 and 119.90 are mixed in with stops and as such the likelihood is that tighter price action will bring about a bout of consolidation through to the North American open.
Exporters, who were active, right through last week's holiday period, have again dominated the sell side with offers touted from 120.00 through 120.20. Sources suggest there is a degree of bid chasing helping to shape the early European offered tone with orders being left closer and closer to market. Option related selling also a factor at play so far this session.
On the buy side the main bids are reportedly camped close to 119.50. The smaller interest between 119.70 and 119.90 are mixed in with stops and as such the likelihood is that tighter price action will bring about a bout of consolidation through to the North American open.
Euro Outlook (7th May 2007)
Into the new week and the Asian markets return to full-strength was offset by the belated UK holiday for May Day. Asian EUR/JPY sales weight while European buying of EUR/CHF propped as the Euro was underpinned by a host of factors. EU and ECB comments combined with the fresh record SENTIX data while German orders data saw a surprise rise in March. However, EUR/USD has continued to pivot the 1.3600 mark with 1.3585/3615 worked on the wide.
More offers trail from 1.3625 to 1.3650 with talk of stops mixed in while on the downside only a break below 1.3550/65 take the pressure off the topside. Looking ahead, with both the ECB and the FOMC set to conclude their latest meetings this week many will prefer to hold fire before taking fresh longer-term positions. Short-term trading should keep the topside in EUR/USD in view with the all-time high at 1.3683 and the option barriers at 1.3690 and 1.3700 then eyed.
Intraday and event-risks are evenly balanced with the 16:00 GMT EuroGroup meeting and the 17:30 GMT speech by the ECB's Tumpel-Gugerell offset by the 18:30 GMT comments from Former Federal Reserve Chairman Alan Greenspan. The only data set for release intraday is the 19:00 GMT release of March US consumer credit data (USD 4.5Bln expected).
More offers trail from 1.3625 to 1.3650 with talk of stops mixed in while on the downside only a break below 1.3550/65 take the pressure off the topside. Looking ahead, with both the ECB and the FOMC set to conclude their latest meetings this week many will prefer to hold fire before taking fresh longer-term positions. Short-term trading should keep the topside in EUR/USD in view with the all-time high at 1.3683 and the option barriers at 1.3690 and 1.3700 then eyed.
Intraday and event-risks are evenly balanced with the 16:00 GMT EuroGroup meeting and the 17:30 GMT speech by the ECB's Tumpel-Gugerell offset by the 18:30 GMT comments from Former Federal Reserve Chairman Alan Greenspan. The only data set for release intraday is the 19:00 GMT release of March US consumer credit data (USD 4.5Bln expected).
Friday, May 04, 2007
GBP/USD: Traders Still Look to Sell Rallies
Cable is trading at 1.9917, still holding near morning highs despite the failure of both JPY and EUR to hold gains against the USD today. The bias, particularly for higher yielding currencies such as GBP, AUD and NZD, is still to sell rallies according to dealers.
Gains have been capped ahead of 1.9930 so far this morning though dealers were hoping to sell around levels of 1.9950/60 where offers are currently reported with the technical bias still bearish on sterling. Support on the downside remains at 1.9845/50, near the morning lows with limited interest expected on Sterling into the afternoon.
Gains have been capped ahead of 1.9930 so far this morning though dealers were hoping to sell around levels of 1.9950/60 where offers are currently reported with the technical bias still bearish on sterling. Support on the downside remains at 1.9845/50, near the morning lows with limited interest expected on Sterling into the afternoon.
USD/JPY: Now Ignoring the Latest US Bond Moves
As noted earlier this morning, the USD bias has shifted regardless of the U.S. data and the USD sell-off has stalled. USD/JPY remains better bid at 120.23 despite another foray in US bond yields towards the 4.64% lows from this morning. The view that emerged in the Japanese press this week that the JGB market is reflecting rising expectations that Japan will not hike rates until late in 2007 continues to support USD/JPY.
However, offers remain firm at 120.50/55 and are unlikely to be tested ahead of the weekend. Looking ahead, the focus is turning to return of Japan to the markets after Golden Week and to see whether a resumption of foreign currency investment demand emerges as well. A light economic calendar is scheduled for next week in Japan with the BOJ minutes due on Monday and BOJ Fukui speaking on May 10th.
However, offers remain firm at 120.50/55 and are unlikely to be tested ahead of the weekend. Looking ahead, the focus is turning to return of Japan to the markets after Golden Week and to see whether a resumption of foreign currency investment demand emerges as well. A light economic calendar is scheduled for next week in Japan with the BOJ minutes due on Monday and BOJ Fukui speaking on May 10th.
EUR/USD: Post Options Expiry Slide As Option Defence Bows Out
EUR/USD peaked at 1.3609 ahead of the 10.00 AM cut and spot has dribbled back down to 1.3585. Rumours that Russia was going to adjust their reserve basket to a larger portion of EUR was behind the pre-10.00 AM pop according to some traders, who also supposedly saw them buying in the market, having been on the sell side yesterday, however options traders think it had a lot more to do with the sizeable expiries.
Apparently there were stops around those same levels but the option defence took care of them. New York traders feel that the topside failure on a day with such depressing news for the dollar looks ominous for the single currency, and reckon that the downside is vulnerable in the afternoon session.
Apparently there were stops around those same levels but the option defence took care of them. New York traders feel that the topside failure on a day with such depressing news for the dollar looks ominous for the single currency, and reckon that the downside is vulnerable in the afternoon session.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] tested 50% retracement levels at Wednesday's lows before reversing and heading over $20 higher since, including today's healthy advance. The $664-65 multiple time frame support zone referenced throughout the week never needed a test as prices bottomed out about $5 higher. Of late, gold has been a leader versus silver, the HUI and XAU indexes.
Downtrends from early March peaks come in at $696-98 Jun today, depending on whether tracking COMEX or CBOT futures. Daily trendline resistance at $692.50 has been almost reached, with weekly targets at $695-97.50 right behind. Monthly resistance is at $697-700.50. A break past $700 would lead to sharply upgraded targets. Measured move projections are in excess of $725. Intraday supports are currently $689 Jun, then $684.50-86.50.
In [oil], a falling wedge pattern remains the most bullish technical case to be made for this market. Prices remain just inside parameters set exactly two weeks ago, when a slightly-over-$4 range was set. With prices holding near the low end of range, bulls could use a boost very soon. Risk is to $61.75-62.00 on a break of $62.40-60 daily supports, not yet reached today.
Trend models are quite mixed, with monthlies bullish, weeklies neutral and dailies bearish. Daily momentum is just entering negative territory today after holding above since early February. The lack of bounce is not too reassuring, but a sharp break does not seem to be in the cards.
Downtrends from early March peaks come in at $696-98 Jun today, depending on whether tracking COMEX or CBOT futures. Daily trendline resistance at $692.50 has been almost reached, with weekly targets at $695-97.50 right behind. Monthly resistance is at $697-700.50. A break past $700 would lead to sharply upgraded targets. Measured move projections are in excess of $725. Intraday supports are currently $689 Jun, then $684.50-86.50.
In [oil], a falling wedge pattern remains the most bullish technical case to be made for this market. Prices remain just inside parameters set exactly two weeks ago, when a slightly-over-$4 range was set. With prices holding near the low end of range, bulls could use a boost very soon. Risk is to $61.75-62.00 on a break of $62.40-60 daily supports, not yet reached today.
Trend models are quite mixed, with monthlies bullish, weeklies neutral and dailies bearish. Daily momentum is just entering negative territory today after holding above since early February. The lack of bounce is not too reassuring, but a sharp break does not seem to be in the cards.
Swiss Outlook (4th May 2007)
Into North American trading and the focus has turned to the 12:30 GMT disclosure of the latest US Employment report. April non-farm employment growth is expected around 100K but many still look for a reading on the weak side. As a result the US unit looks poised to react in either direction to the data.
With the risk profile seen as "asymmetrical" Dollar majors have been happy to maintain recent ranges ahead of the release, USD/CHF continues to trade around the 1.2150 mark while option barriers into 1.2200 are confirmed on the topside. Below 1.2135 props with more support into 1.2095/2100. Following this 13:40 sees the ECRI release its monthly inflation gauge index for April and at 13:45 GMT the Fed's Geithner is set to speak.
Elsewhere, the unexpected rise in Swiss inflation (data released yesterday) may well prove short-lived but this will not stop the market mulling over the potential for a more aggressive SNB rate move in Q2. There is an old expression "make hay while the sun shines" and economists are simply putting this to practice as the market mulls over the potential for a 50bp hike.
With the risk profile seen as "asymmetrical" Dollar majors have been happy to maintain recent ranges ahead of the release, USD/CHF continues to trade around the 1.2150 mark while option barriers into 1.2200 are confirmed on the topside. Below 1.2135 props with more support into 1.2095/2100. Following this 13:40 sees the ECRI release its monthly inflation gauge index for April and at 13:45 GMT the Fed's Geithner is set to speak.
Elsewhere, the unexpected rise in Swiss inflation (data released yesterday) may well prove short-lived but this will not stop the market mulling over the potential for a more aggressive SNB rate move in Q2. There is an old expression "make hay while the sun shines" and economists are simply putting this to practice as the market mulls over the potential for a 50bp hike.
Sterling Outlook (4th May 2007)
Fresh market-moving influence over cable will be exerted by the 12:30GMT publication of April's US employment report. NFP jobs growth forecast: 100k. Unemployment rate forecast: 4.5%, from 4.4% in March.
GBP/USD erased 1.9850 exotic option barriers in plumbing an early Europe 18-day low of 1.9845. Today's Asian session floor was 1.9851. Sub-1.9845 support points/bear targets include 1.9830 (Apr 16 low), 1.9820, 1.9800 and 1.9770.
Sterling resistance levels are located at 1.9870 (Wednesday's base), 1.9900 and 1.9950 (yesterday's high). 1.9875 and 1.9910 option strikes roll off at today's 10am Eastern NY cut (14:00GMT/3pm BST).
The SNP looks set to overtake Labour, albeit narrowly, as the largest party in the Scottish parliament (FT website). The SNP want a referendum on Scottish independence. Tony Blair is expected to announce next Wednesday or Thursday that he is stepping down as Labour leader, and PM. The BoE MPC is forecast to hike the UK base rate by 25bp to 5.5% next Thursday.
GBP/USD erased 1.9850 exotic option barriers in plumbing an early Europe 18-day low of 1.9845. Today's Asian session floor was 1.9851. Sub-1.9845 support points/bear targets include 1.9830 (Apr 16 low), 1.9820, 1.9800 and 1.9770.
Sterling resistance levels are located at 1.9870 (Wednesday's base), 1.9900 and 1.9950 (yesterday's high). 1.9875 and 1.9910 option strikes roll off at today's 10am Eastern NY cut (14:00GMT/3pm BST).
The SNP looks set to overtake Labour, albeit narrowly, as the largest party in the Scottish parliament (FT website). The SNP want a referendum on Scottish independence. Tony Blair is expected to announce next Wednesday or Thursday that he is stepping down as Labour leader, and PM. The BoE MPC is forecast to hike the UK base rate by 25bp to 5.5% next Thursday.
Yen Outlook (4th May 2007)
A generally firmer Dollar through the early European session, the USD index continues to flirt with levels above 82.00, but a more subdued level of action for USD/JPY. The market, which has been fairly active this week despite the Golden Week holidays, looks to have blown itself out. A brief flurry of activity between 120.21 and 120.40 cleared away some stale overnight short plays but the bounce to the highs failed to hold and we are now witnessing price consolidation at 120.35.
Thursday's positive U.S data releases have given the market cause to be optimistic heading into today's payroll numbers. USD/JPY recorded a two-month high of 120.47 last session and is now consolidating these gains. Option plays are still a feature of this market and we have 120.50 barriers and associated offers along with 120.00 and 120.25 strikes that are rolling off today.
Technically the Dollar is looking a tad top heavy above 120.00 but there is
room for corrective action back to the figure without damaging the underlying trend.
Thursday's positive U.S data releases have given the market cause to be optimistic heading into today's payroll numbers. USD/JPY recorded a two-month high of 120.47 last session and is now consolidating these gains. Option plays are still a feature of this market and we have 120.50 barriers and associated offers along with 120.00 and 120.25 strikes that are rolling off today.
Technically the Dollar is looking a tad top heavy above 120.00 but there is
room for corrective action back to the figure without damaging the underlying trend.
Euro Outlook (4th May 2007)
Into North American trading and the focus has turned to the 12:30 GMT disclosure of the latest US Employment report. April non-farm employment growth is expected around 100K but many still look for a reading on the weak side. As a result the US unit looks poised to react in either direction to the data.
With the risk profile seen as "asymmetrical" Dollar majors have been happy to maintain recent ranges ahead of the release, EUR/USD has traded a rough 1.3535/75 range intraday with spot pivoting the 1.3550 mark in late European action, a level where option expiries are noted at the NY cut (14:00 GMT). More offers lay into 1.3600 while on the downside 1.3500 is seen as key.
Following this 13:40 sees the ECRI release its monthly inflation gauge index for April and at 13:45 GMT the Fed's Geithner is set to speak. While 1.35/36 remains intact the broader bias should also remain in check but option traders are noting 1.35 & 1.36 strikes today that should fortify these levels. Technically, however, the weekly close will be key with a sub-1.3545 close eyed by one UK Clearer to put the pair on course towards 1.3370.
With the risk profile seen as "asymmetrical" Dollar majors have been happy to maintain recent ranges ahead of the release, EUR/USD has traded a rough 1.3535/75 range intraday with spot pivoting the 1.3550 mark in late European action, a level where option expiries are noted at the NY cut (14:00 GMT). More offers lay into 1.3600 while on the downside 1.3500 is seen as key.
Following this 13:40 sees the ECRI release its monthly inflation gauge index for April and at 13:45 GMT the Fed's Geithner is set to speak. While 1.35/36 remains intact the broader bias should also remain in check but option traders are noting 1.35 & 1.36 strikes today that should fortify these levels. Technically, however, the weekly close will be key with a sub-1.3545 close eyed by one UK Clearer to put the pair on course towards 1.3370.
Thursday, May 03, 2007
US GOVTS: Fed Coupon Pass Adds $1.396 Bln in Banking Reserves
Today's coupon pass, the second in as many days, added $1.396 bln in permanent reserves to the banking system. The operation targeted 16 maturities ranging from November 15, 2009 to November 15, 2010. The Fed accepted tenders on six of the maturities, the most in the 4-1/8s of August 2010 ($490 mln) and the 3-7/8s of September 15, 2010 ($380 mln).
USD/JPY: Quasi-Official Accounts Turn Buyers
The USD/JPY has dropped off the highs this morning to current levels of 120.27 in about of profit-taking on the new USD longs though with traders reporting that sovereign names including Asian accounts are selling USD/JPY into the current rally, capping USD/JPY.
However, dealers also say that a quasi-official account has been a buyer near the highs, helping to underpin USD/JPY and there is talk of USD buying at the London fix that is supporting USD/JPY on this slight dip and adding to the bid tone currently. US ten-year bond yields remain at session highs around 4.68% and continue to support USD/JPY.
However, dealers also say that a quasi-official account has been a buyer near the highs, helping to underpin USD/JPY and there is talk of USD buying at the London fix that is supporting USD/JPY on this slight dip and adding to the bid tone currently. US ten-year bond yields remain at session highs around 4.68% and continue to support USD/JPY.
EUR/USD: Large Central Bank Seller Weighs On Market As Does IMM
Talk of a large central bank actively selling EUR/USD in today's session has left a pall over the market, as the same player was an integral participant of the Euro's several year long rise. Traders are apprehensive that perhaps they had gotten a little ahead of their reserve accumulation required under their guidelines.
Talk is also that one of the largest US banks is sitting on the bid ahead of stops thought to reside below 1.3550, and giving some credence to the belief that there is a barrier being defended. The IMM have chalked up some E350mn in sales on the session, a little behind their tally from two day ago at the same time, ironically following the release of the "other" ISM; sales on that day were roughly E465mn.
Given the enormous outstandings there is plenty more to go, and another interesting facet of recent data is that yesterday, an "up day" for EUR buying over the same period was a tepid E280mn, tepid in comparison to other up days (Chicago bought E285mn in the first hour last Friday). The market is getting very nervous the closer we get to tomorrow's NFP number.
Talk is also that one of the largest US banks is sitting on the bid ahead of stops thought to reside below 1.3550, and giving some credence to the belief that there is a barrier being defended. The IMM have chalked up some E350mn in sales on the session, a little behind their tally from two day ago at the same time, ironically following the release of the "other" ISM; sales on that day were roughly E465mn.
Given the enormous outstandings there is plenty more to go, and another interesting facet of recent data is that yesterday, an "up day" for EUR buying over the same period was a tepid E280mn, tepid in comparison to other up days (Chicago bought E285mn in the first hour last Friday). The market is getting very nervous the closer we get to tomorrow's NFP number.
USD/JPY: Bullish Trend Intensity Signal Advances
The bullish trend intensity signal for USD/JPY has advanced a notch to 12 yesterday. The EUR/JPY bullish trend signal also advanced a notch to 32 but is nearing mature levels of 35 or above. The EUR/USD bullish trend signal has been neutralized, falling to 32.
The GBP/USD bullish trend signal has also been neutralized, easing to 27. The USD/CHF trend signal is neutral at trend-ready levels of 12. The EUR/GBP trend signal is neutral at trend-ready levels of 12. These proprietary indicators are updated each trading day after the NY close.
The GBP/USD bullish trend signal has also been neutralized, easing to 27. The USD/CHF trend signal is neutral at trend-ready levels of 12. The EUR/GBP trend signal is neutral at trend-ready levels of 12. These proprietary indicators are updated each trading day after the NY close.
Swiss Outlook (3rd May 2007)
The Swiss Franc rallied into early European trading on the back of the upward surprise in April Swiss CPI data. Macro buyers emerged after the +0.5% Y/Y release and USD/CHF was sold back from 1.2140 towards 1.2100. Bids into 1.2095/2100 stalled the move and the price has since consolidated the drop but stops below 1.2090 remain targeted by bears.
[EUR/CHF] was sold from 1.6515 to 1.6472 in the initial knee-jerk move. However, buyers in the cross were noted trailing back to 1.6465 so the move lower in the cross began to stall also. However, selling has persisted here with sub-1.6465 stops now in focus. Looking ahead, US data will once more drive short-term volatility but it is the Friday release of US Employment data that many prefer to concentrate upon.
Into NorAm trading and the USD still needs to navigate the preliminary Q1 productivity data and the April Non-Manf. ISM release. Weekly jobless data is also set for release with the Q1 data at 12:30 GMT while economists look for the 14:00 GMT ISM data to rise to 53.0 from the 52.4 seen previously. After this the attention will turn to the Paulson comments.
[EUR/CHF] was sold from 1.6515 to 1.6472 in the initial knee-jerk move. However, buyers in the cross were noted trailing back to 1.6465 so the move lower in the cross began to stall also. However, selling has persisted here with sub-1.6465 stops now in focus. Looking ahead, US data will once more drive short-term volatility but it is the Friday release of US Employment data that many prefer to concentrate upon.
Into NorAm trading and the USD still needs to navigate the preliminary Q1 productivity data and the April Non-Manf. ISM release. Weekly jobless data is also set for release with the Q1 data at 12:30 GMT while economists look for the 14:00 GMT ISM data to rise to 53.0 from the 52.4 seen previously. After this the attention will turn to the Paulson comments.
Sterling Outlook (3rd May 2007)
Cable broke through the peak of today's 1.9879-1.9908 Asian session range in early European trade, as the continent absorbed the content of yesterday's speech from Mervyn King. The BoE Governor stated that rapid growth in the supply of money and credit in the UK economy may be warning signal of inflationary risks (Times). King has also pledged to give financial markets a better idea of the circumstances that are likely to trigger rate changes (FT).
1.9939 was the European morning high. Touted offers at 1.9950 represent an appreciation obstacle above. Upper resistance levels: 1.9970, 1.9990 and 2.0000.
EUR/GBP has elicited support ahead of 0.6825 since its fall from an early Europe intra-day high of 0.6837. Some of that support might be option-related, re: talk of a very large 0.6825 option strike in the market. There are 0.6825, 0.6815 and 0.6800 option expiries at today's 10am Eastern NY cut (14:00GMT).
April's US ISM non-manufacturing index is due at 14:00GMT. Forecast: 53.2. US weekly jobless claims precede at 12:30GMT. Forecast: 325k. UK local election polling stations close at 21:00GMT (BBC website).
1.9939 was the European morning high. Touted offers at 1.9950 represent an appreciation obstacle above. Upper resistance levels: 1.9970, 1.9990 and 2.0000.
EUR/GBP has elicited support ahead of 0.6825 since its fall from an early Europe intra-day high of 0.6837. Some of that support might be option-related, re: talk of a very large 0.6825 option strike in the market. There are 0.6825, 0.6815 and 0.6800 option expiries at today's 10am Eastern NY cut (14:00GMT).
April's US ISM non-manufacturing index is due at 14:00GMT. Forecast: 53.2. US weekly jobless claims precede at 12:30GMT. Forecast: 325k. UK local election polling stations close at 21:00GMT (BBC website).
Yen Outlook (3rd May 2007)
Wednesday's U.S manufacturing data added strength to the "status quo" view for U.S interest rates and gave the Dollar a small boost. The Golden week holidays and the May day breaks in Europe have sapped market interest from USD/JPY and flows are reportedly light. The Japanese holiday has not prevented the export sector from hedging and Dollar sales have stunted USD/JPY"s progress from the European open.
A 120.00 to 120.25 band was played out in London with a brief drop to 119.97 finding bids. Stops are touted above 120.30, option barriers at 120.50 and offers mixed in between these two levels. Little interest touted on the bid side but standing interest from Asian and U.S accounts is expected to stall if not hold a 120.00 test. Away from the spot action the focus will be on another set of U.S data releases.
Jobless claims for week ending April 28 are expected to show 325k new filings. April's ISM non-manufacturing data is expected to show a 53 reading from March's 52.4 return. The options market is touting 120.20 expiries, a USD 500 mln 119.85 roll off and 120.50 barriers.
A 120.00 to 120.25 band was played out in London with a brief drop to 119.97 finding bids. Stops are touted above 120.30, option barriers at 120.50 and offers mixed in between these two levels. Little interest touted on the bid side but standing interest from Asian and U.S accounts is expected to stall if not hold a 120.00 test. Away from the spot action the focus will be on another set of U.S data releases.
Jobless claims for week ending April 28 are expected to show 325k new filings. April's ISM non-manufacturing data is expected to show a 53 reading from March's 52.4 return. The options market is touting 120.20 expiries, a USD 500 mln 119.85 roll off and 120.50 barriers.
Euro Outlook (3rd May 2007)
Into European trading and the late Asian failure to break below 1.3590 left the topside in view. Spot broke back into the 1.36's but offers into 1.3610 once more looked to cap. However, with the Dollar forced onto the back-foot by USD/CHF sales this standing supply was soon absorbed. Stops above 1.3610 popped and 1.3619 printed before fund sales emerged to limit the move higher.
The price consolidated for a period but more offers were noted trailing to 1.3625 to keep the stops above 1.3630 in play and as a result the pair has since worked inside a 1.3600/20 band. As expected EZ data failed to bolster support for the Euro while stops are seen building below 1.3580. Above option barriers at 1.3590 & 1.3600 will continue to be protected.
Looking ahead, US Employment data due tomorrow may be eyed by many but into NorAm trading and the USD still needs to navigate the preliminary Q1 productivity data and the April Non-Manf. ISM release. Weekly jobless data is also set for release with the Q1 data at 12:30 GMT while economists look for the 14:00 GMT ISM data to rise to 53.0 from 52.4.
The price consolidated for a period but more offers were noted trailing to 1.3625 to keep the stops above 1.3630 in play and as a result the pair has since worked inside a 1.3600/20 band. As expected EZ data failed to bolster support for the Euro while stops are seen building below 1.3580. Above option barriers at 1.3590 & 1.3600 will continue to be protected.
Looking ahead, US Employment data due tomorrow may be eyed by many but into NorAm trading and the USD still needs to navigate the preliminary Q1 productivity data and the April Non-Manf. ISM release. Weekly jobless data is also set for release with the Q1 data at 12:30 GMT while economists look for the 14:00 GMT ISM data to rise to 53.0 from 52.4.
Wednesday, May 02, 2007
EUR/USD: Capped at 1.3595 on Rebounds
EUR/USD is running into offers at 1.3595 in the wake of a soft ADP prognostication for payrolls. Their track record is still suspect as they tweak their model from month-to-month, so take it with a grain of salt. The market continues to look for a rise in payrolls of a bit over 100k. More offers are seen toward 1.3600 and 1.3620. Firm EUR/JPY prices are helping support the EUR at present.
GBP/USD: Lent Support by Disappointing ADP Jobs Report Number
Cable has elicited support from the disappointing US ADP employment report number. This came in at 64k, against the 100k forecast. Sterling revisited Monday's pre-1.9890 lows at the NY open, after tripping stops below 1.9900. 1.9870/80 is a touted support window south of 1.9890.
Prop points below include 1.9850, 1.9830 (Apr 16 base) and 1.9800. A 1.9850 option strike rolls off at today's 10am Eastern NY cut (14:00GMT/3pm BST). GBP/USD resistance levels include 1.9939 (today's Asian session base), 1.9970 and 1.9991 (today's Asian session top).
US March factory orders will be revealed at 14:00GMT. Forecast: +2.0% m/m. US Treasury Secretary Paulson is slated to speak at 15:00GMT. BoE Governor King is due to address the Society of Business Economists at 17:30GMT. The next BoE MPC meeting is next week (May 9/10).
Prop points below include 1.9850, 1.9830 (Apr 16 base) and 1.9800. A 1.9850 option strike rolls off at today's 10am Eastern NY cut (14:00GMT/3pm BST). GBP/USD resistance levels include 1.9939 (today's Asian session base), 1.9970 and 1.9991 (today's Asian session top).
US March factory orders will be revealed at 14:00GMT. Forecast: +2.0% m/m. US Treasury Secretary Paulson is slated to speak at 15:00GMT. BoE Governor King is due to address the Society of Business Economists at 17:30GMT. The next BoE MPC meeting is next week (May 9/10).
USD/CHF: Already On The Pullback But ADP Data Adds Weight
A broad based Dollar pullback following the U.S ADP data and USD/CHF has fallen to 1.2155 from 1.2170. The market was already retracing its steps having topped out at 1.2188-90 earlier in the session. The ADP jobs report shows that 64,000 new jobs were added to the private sector in April, which is clear below 105,000 market consensus.
The data might give some indication that Friday's non-farm payroll data might undershoot the market forecast. USD/CHF has support at 1.2130, intraday lows, and initial resistance at the 1.2188 hourly top.
The data might give some indication that Friday's non-farm payroll data might undershoot the market forecast. USD/CHF has support at 1.2130, intraday lows, and initial resistance at the 1.2188 hourly top.
Swiss Outlook (2nd May 2007)
Into North American trading and the Dollar is once more looking for a data boost. However, with ADP data (12:15 GMT) expected to give the market an idea of the ball park NFP reading any sub-100K headline could drag the consensus for the Employment lower. One UK name suggests a 70K ADP will point to an 85K NFP, which is below the current 100K consensus for the Friday data.
Also set for release is the 14:00 GMT March US Factory Orders data. Should the Dollar strengthen further in the wake of the data then USD/CHF will cast an eye on the 1.2200 level where renewed option barriers are reported to reside. Bids into 2130/35 are eyed on dips while EUR/CHF buying continues to support. Local dealers suggest the fall in April Swiss PMI to 61.9, from 62.0, will not detract from the recent string of robust economic indicators.
The Thursday 05:45 GMT release of local inflation data is now eyed with CPI expected to rise by 0.7% M/M and 0.1% on the year. The higher monthly increase is seen as a product of the higher shoe and clothing prices while the annualized rate compares to the previous March reading.
Also set for release is the 14:00 GMT March US Factory Orders data. Should the Dollar strengthen further in the wake of the data then USD/CHF will cast an eye on the 1.2200 level where renewed option barriers are reported to reside. Bids into 2130/35 are eyed on dips while EUR/CHF buying continues to support. Local dealers suggest the fall in April Swiss PMI to 61.9, from 62.0, will not detract from the recent string of robust economic indicators.
The Thursday 05:45 GMT release of local inflation data is now eyed with CPI expected to rise by 0.7% M/M and 0.1% on the year. The higher monthly increase is seen as a product of the higher shoe and clothing prices while the annualized rate compares to the previous March reading.
Sterling Outlook (2nd May 2007)
BoE Governor King is slated to address the Society of Business Economists at 17:30GMT. The BoE MPC is expected to hike the UK base rate by 25bp to 5.5% tomorrow week (May 10). A further increase to 5.75% is priced in for H2, with risk to 6.0%. The UK base rate was last at 6.0% in January 2001.
Tripped stops below 1.9939 (today's Asian session base) helped depress GBP/USD to a two-day low of 1.9914 in early European trade. USD buying from US model funds weighed on the rate from an early Asian session high of 1.9991.
Sterling sub-teen buy interest is tipped at 1.9900. Touted bear targets below include 1.9890, 1.9860 and 1.9830 (Apr 16 low). A 1.9850 option strike rolls off at today's 10am Eastern NY cut (14:00GMT/3pm BST).
EUR/GBP 0.6810-15 option strikes roll off at today's NY cut. Bids are noted at 0.6800, with some sell stops pegged below the figure.
April's US ADP employment survey is due at 12:15GMT. Jobs growth forecast: 105k. March US factory orders ensue at 14:00GMT. Forecast: +2.0% m/m. April's US jobs report is out Friday. NFP forecast: 100k.
Tripped stops below 1.9939 (today's Asian session base) helped depress GBP/USD to a two-day low of 1.9914 in early European trade. USD buying from US model funds weighed on the rate from an early Asian session high of 1.9991.
Sterling sub-teen buy interest is tipped at 1.9900. Touted bear targets below include 1.9890, 1.9860 and 1.9830 (Apr 16 low). A 1.9850 option strike rolls off at today's 10am Eastern NY cut (14:00GMT/3pm BST).
EUR/GBP 0.6810-15 option strikes roll off at today's NY cut. Bids are noted at 0.6800, with some sell stops pegged below the figure.
April's US ADP employment survey is due at 12:15GMT. Jobs growth forecast: 105k. March US factory orders ensue at 14:00GMT. Forecast: +2.0% m/m. April's US jobs report is out Friday. NFP forecast: 100k.
Yen Outlook (2nd May 2007)
USD/JPY rose in Asia on the back of pre-holiday Japanese importer settlement demand at the Tokyo fix and general USD strength. US and other model funds were good buyers of USD in a number of pairs. This demand helped push USD/JPY above 120.00 for the first time since February 27 and take out option barriers there, some tipped to be expiring today.
Stops were set off, taking it up to as high as 120.15 before profit-takes and Japanese exporter sales pushed it back a bit. London came in at 119.60-65 and quickly pushed the USD back into bull mode. Price recorded new highs at 120.25, option barriers were touted at the level but the jury is out on whether they have been removed. Exporter offers trailing up to 121.00+ should provide considerable headwind.
However, USD looks bid and the February 27 high of 120.75 could be tested soon. EUR/JPY and other JPY crosses remain resilient, edging higher through London with the downside seen limited. Very low interest rates in Japan for months to come will help keep the yen pressured vs the Dollar and on the crosses.
Stops were set off, taking it up to as high as 120.15 before profit-takes and Japanese exporter sales pushed it back a bit. London came in at 119.60-65 and quickly pushed the USD back into bull mode. Price recorded new highs at 120.25, option barriers were touted at the level but the jury is out on whether they have been removed. Exporter offers trailing up to 121.00+ should provide considerable headwind.
However, USD looks bid and the February 27 high of 120.75 could be tested soon. EUR/JPY and other JPY crosses remain resilient, edging higher through London with the downside seen limited. Very low interest rates in Japan for months to come will help keep the yen pressured vs the Dollar and on the crosses.
Euro Outlook (2nd May 2007)
The Asian Dollar rally was short-lived and into late Asian trading the dip to 1.3561 was corrected. As a result Europe inherited a spot price in the 1.3590's but option related sales helped cap the topside and ahead of the European data the price eased back from the 1.3597 session high. Bids into 1.3570 propped the dip as Euro Zone data was digested but the Euro failed to garner any significant support, despite EZ Unemployment hitting a record low.
Looking ahead, US data is eyed once more into North American trading as the 12:15 GMT ADP report that gives the market further insight as to the likely range for the Friday Employment report. It will take a break below 1.3540 before the longer-term uptrend is undone. Stops are noted on a break below here with some suggesting these orders trail back to below 1.3500.
On the options front, a plethora of strikes impact the market intraday with 1.3540 to 1.3750 the range. Decent sized 1.3600 and 1.3605 expiries helped cap the early European spot strength but with the downside in focus it will be the 1.3540/45 maturities that are closest to market into early NY trading.
Looking ahead, US data is eyed once more into North American trading as the 12:15 GMT ADP report that gives the market further insight as to the likely range for the Friday Employment report. It will take a break below 1.3540 before the longer-term uptrend is undone. Stops are noted on a break below here with some suggesting these orders trail back to below 1.3500.
On the options front, a plethora of strikes impact the market intraday with 1.3540 to 1.3750 the range. Decent sized 1.3600 and 1.3605 expiries helped cap the early European spot strength but with the downside in focus it will be the 1.3540/45 maturities that are closest to market into early NY trading.
EUR/USD: Bernanke Appears in No Rush to Cut
Bernanke tells a Montana audience that US real interest rates are "very, very low". Those do not sound like the words of a central banker even remotely contemplating an interest cut. He also says the US needs to up its savings rate to balance the trade gap and that the US needs to think hard on budget priorities ahead of the retirement of the baby-boom generation. EUR/USD is dipping back below 1.3600 after stalling several times ahead of 1.3585/90 support.
GBP/USD: Fresh Downside Pressure as Rally Reverses
Cable is coming under fresh pressure as this morning's rally through resistance at 2.0060/65 was quickly reversed. Support at 1.9985 is under pressure as we write with bulls trapped well above market prices. Dealers were enthused early in the day after the CBI retail data showed a sharp uptick. Further support for the pound lies at 1.9965/70; stops are placed just below that level.
USD/JPY: Still Tracking the US Bond Yields
The USD/JPY continues to hold a strong bid, testing session highs at 119.78, with the momentum derived from the US bond yield performance. The US ten-year bond yield has rallied above 4.66% and fresh highs on the day. Good offers remain ahead of 120.00 and many exporters left good sized selling orders around these levels before leaving for Golden Week.
In news in the Nikkei this morning, PM Abe has ruled out a double dissolution of the lower and upper house at the upcoming July elections. Stops remain above 120.00 on USD/JPY but sellers emerge at 120.05/10 and are staggered up to 120.50.
In news in the Nikkei this morning, PM Abe has ruled out a double dissolution of the lower and upper house at the upcoming July elections. Stops remain above 120.00 on USD/JPY but sellers emerge at 120.05/10 and are staggered up to 120.50.
Swiss Outlook (1st May 2007)
Into North American trading and liquidity should thicken. More Asian holidays have been followed by most of Europe taking a May Day rest. As a result, USD/CHF has spent the day so-far trading inside a rough 1.2075/2100 range. Standing supply is in place at 1.2100/05 to cap rallies while more buyers are seen back from 1.2065 to 1.2050/55 to prop dips.
US data in NorAm trading should once more drive short-term spot volatility. April ISM and March Pending Home Sales are due for release at 14:00 GMT before Bernanke speaks in Montana at 15:00 GMT. Local players suggest only a break below 1.20 adds fresh momentum. Looking further ahead, Swiss dealers look to local inflation data due later in the week. Swiss April CPI is expected to have risen by 0.7% on the month but just by 0.1% on the year.
The higher monthly increase is seen as a product of higher shoe and clothing prices while the annualized rate compares to the previous March reading. The data is due on Thursday at 05:45 GMT and should confirm the low inflation outlook the SNB forecasts take into account. Regardless of the results, we at IFR still look for a 25bps hike in Q2.
US data in NorAm trading should once more drive short-term spot volatility. April ISM and March Pending Home Sales are due for release at 14:00 GMT before Bernanke speaks in Montana at 15:00 GMT. Local players suggest only a break below 1.20 adds fresh momentum. Looking further ahead, Swiss dealers look to local inflation data due later in the week. Swiss April CPI is expected to have risen by 0.7% on the month but just by 0.1% on the year.
The higher monthly increase is seen as a product of higher shoe and clothing prices while the annualized rate compares to the previous March reading. The data is due on Thursday at 05:45 GMT and should confirm the low inflation outlook the SNB forecasts take into account. Regardless of the results, we at IFR still look for a 25bps hike in Q2.
Sterling Outlook (1st May 2007)
UK clearer demand helped inflate cable to an intra-day high of 2.0036 in early European trade. Demand at 1.9990 based the subsequent pullback. Some stops reportedly reside below 1.9985 (today's Asian session base).
April's much better-than-expected CBI retail sales balance underpins the expectation that the UK base rate will be upped by 25bp to 5.5% next week (May 10) and hiked by another 25bp to 5.75% in H2, with risk to 6.0%.
2.0045 (last Friday's high), 2.0062 (double-day top, last Wednesday and Thursday) and 2.0095 (Apr 19 peak) are resistance levels north of 2.0036.
Outgoing UK PM Blair will make a "definitive" statement on his future next week (GMTV/Bloomberg). Barring a political earthquake, UK Chancellor Brown will succeed Blair as PM this summer. There are UK local elections this Thursday.
April's US ISM manufacturing index will be disclosed at 14:00GMT. Headline index forecast: 51.0. Prices paid index forecast: 67.3. US March pending home sales will also be revealed at 14:00GMT. Forecast: +0.2% m/m. Fed chairman Bernanke is due to speak at 15:00GMT.
April's much better-than-expected CBI retail sales balance underpins the expectation that the UK base rate will be upped by 25bp to 5.5% next week (May 10) and hiked by another 25bp to 5.75% in H2, with risk to 6.0%.
2.0045 (last Friday's high), 2.0062 (double-day top, last Wednesday and Thursday) and 2.0095 (Apr 19 peak) are resistance levels north of 2.0036.
Outgoing UK PM Blair will make a "definitive" statement on his future next week (GMTV/Bloomberg). Barring a political earthquake, UK Chancellor Brown will succeed Blair as PM this summer. There are UK local elections this Thursday.
April's US ISM manufacturing index will be disclosed at 14:00GMT. Headline index forecast: 51.0. Prices paid index forecast: 67.3. US March pending home sales will also be revealed at 14:00GMT. Forecast: +0.2% m/m. Fed chairman Bernanke is due to speak at 15:00GMT.
Yen Outlook (1st May 2007)
Early action saw a quick spike to the touted 119.60-65 offers and the market turned around. The pullback to 119.55 had some weight behind it and a return to the early European low of 119.45 was on the cards. Further selling interest is touted between 119.70 and 119.90, just ahead of rumoured 120.00 option barriers.
There are also large 119.50 and 120.00 straight expiries with the 119.50 deal rumoured to be for USD 350 mln. Stops are touted above 120.10 and 120.20. On the buy side we are hearing of good 119.35-40 bids. USD/JPY has been caught up in the EUR/JPY rally to new highs of 163.31 as the prospects of higher Euro-zone interest rates impact the market.
Thin European trading conditions has seen much of the business channeled through London and until the US market gets going the Yen is likely to remain on the back foot. US ISM data for April is due at 12:30 GMT with expectations for a rise to 51.5 from 50.9 in March. With the Dollar already looking good vs the Yen it will take a poor number to upset the order.
There are also large 119.50 and 120.00 straight expiries with the 119.50 deal rumoured to be for USD 350 mln. Stops are touted above 120.10 and 120.20. On the buy side we are hearing of good 119.35-40 bids. USD/JPY has been caught up in the EUR/JPY rally to new highs of 163.31 as the prospects of higher Euro-zone interest rates impact the market.
Thin European trading conditions has seen much of the business channeled through London and until the US market gets going the Yen is likely to remain on the back foot. US ISM data for April is due at 12:30 GMT with expectations for a rise to 51.5 from 50.9 in March. With the Dollar already looking good vs the Yen it will take a poor number to upset the order.
Euro Outlook (1st May 2007)
Market holidays in China, Hong Kong and Singapore were observed overnight and this has kept volatility muted into the holiday effected European session. With most of Europe out for May Day celebrations the moribund state of play has continued into the North American open.
Buying of the Euro on the crosses saw the unit hit fresh all-time highs against the Yen (163.31) and the Franc (1.6497) but Sterling strength has offset any significant support being garnered. Customer flows saw a German players sell EUR/USD and spot fell back from 1.3661 to 1.3626 to provide the only real move of the morning. Spot has since consolidated with buyers trailing from 1.3645 back to the all-time high at 1.3683.
Option players note barriers into 1.3690 and 1.3700 that will continue to be defended while on the downside a EUR 500Mln 1.36 strike is set at 14:00 GMT. US data today comes in the form of April ISM and March Pending Home Sales at 14:00 GMT with a Bernanke speech scheduled for 15:00 GMT. Should the Dollar rebound then stops are eyed below 1.3590.
Buying of the Euro on the crosses saw the unit hit fresh all-time highs against the Yen (163.31) and the Franc (1.6497) but Sterling strength has offset any significant support being garnered. Customer flows saw a German players sell EUR/USD and spot fell back from 1.3661 to 1.3626 to provide the only real move of the morning. Spot has since consolidated with buyers trailing from 1.3645 back to the all-time high at 1.3683.
Option players note barriers into 1.3690 and 1.3700 that will continue to be defended while on the downside a EUR 500Mln 1.36 strike is set at 14:00 GMT. US data today comes in the form of April ISM and March Pending Home Sales at 14:00 GMT with a Bernanke speech scheduled for 15:00 GMT. Should the Dollar rebound then stops are eyed below 1.3590.
Tuesday, May 01, 2007
USD/JPY: Japan FSA to Monitor Hedge Funds This Fall - Nikkei
Through the month of April, a number of global financial authorities have increased their scrutiny of hedge funds with the EU officials expressing concern and Bank of England warning in its stability report last week that the danger of a financial crisis has increased since last summer.
The BOE also highlighted the "overstretched" commercial property market and private equity. Now the concerns have moved to Japan with the Nikkei reporting this afternoon that the FSA will begin monitoring hedge funds, with funds expected to register in September when recent law goes into place. If this unnerves investors, the popular leveraged carry trades are likely to come under pressure.
USD/JPY is easing lower to 119.35 this afternoon with profit-taking seen on carry trade gains made earlier today. Offers remain very firm ahead of 120.00 but traders note a dearth of buying on the downside with Japanese investors and importers lowering their larger bids over the Golden Week holiday on expectations of a seasonal USD/JPY decline over the holiday.
The BOE also highlighted the "overstretched" commercial property market and private equity. Now the concerns have moved to Japan with the Nikkei reporting this afternoon that the FSA will begin monitoring hedge funds, with funds expected to register in September when recent law goes into place. If this unnerves investors, the popular leveraged carry trades are likely to come under pressure.
USD/JPY is easing lower to 119.35 this afternoon with profit-taking seen on carry trade gains made earlier today. Offers remain very firm ahead of 120.00 but traders note a dearth of buying on the downside with Japanese investors and importers lowering their larger bids over the Golden Week holiday on expectations of a seasonal USD/JPY decline over the holiday.
EUR/USD: Cash M&A Deal May Help Greenback
The world of multi-billion cross-border M&A deals, this one is relatively small potatoes but it is a cash deal. Deutsche Boerse announced a short while ago it will acquire US equity options exchange ISE for $2.8 bln. The deal is expected to close in the second half of this year if approved by regulators.
EUR/USD has settled down into a consolidation in the upper end of the day's range, trading now at 1.3663. Price stalled just a few pips shy of the 1.3682 highs posted on Friday. Protection of 1.3690 and 1.3700 barriers is rumored on strength. Bids are seen at 1.3650/55 on pullbacks.
EUR/USD has settled down into a consolidation in the upper end of the day's range, trading now at 1.3663. Price stalled just a few pips shy of the 1.3682 highs posted on Friday. Protection of 1.3690 and 1.3700 barriers is rumored on strength. Bids are seen at 1.3650/55 on pullbacks.
Swiss Outlook (30th April 2007)
As voiced by a Swiss name earlier "another day, another verbal intervention on the weak level of the Franc". The comments from Friday from the SNB that further hikes may be needed are of little comfort to the Franc as it continues to be used as a funding tool against higher yielding units.
Both USD/CHF and EUR/CHF have worked higher in European trading with recent range tops eyed by many as targets for further stabs higher. Into North American trading and the slew of US data again takes the stage to give USD/CHF its short-term momentum. The early run sees the Commerce Dept. release March personal income and consumption data. Economists expect a rise of 0.5% in both March income and spending.
Following this, 13:00 GMT sees NY April NAPM released with Chicago PMI set for unveiling at 13:45 GMT. Against the Euro, the all-time highs in EUR/CHF at 1.6468 and the 1.6500 option barriers are eyed should the topside stay in focus but many remain wary over fresh Franc strength going forward as local markets await the latest batch of inflation data from the mountain economy.
Both USD/CHF and EUR/CHF have worked higher in European trading with recent range tops eyed by many as targets for further stabs higher. Into North American trading and the slew of US data again takes the stage to give USD/CHF its short-term momentum. The early run sees the Commerce Dept. release March personal income and consumption data. Economists expect a rise of 0.5% in both March income and spending.
Following this, 13:00 GMT sees NY April NAPM released with Chicago PMI set for unveiling at 13:45 GMT. Against the Euro, the all-time highs in EUR/CHF at 1.6468 and the 1.6500 option barriers are eyed should the topside stay in focus but many remain wary over fresh Franc strength going forward as local markets await the latest batch of inflation data from the mountain economy.
Sterling Outlook (30th April 2007)
Cable has run into resistance pre-1.9950 since pushing its recovery envelope from European morning lows just shy of 1.9890 bids following the 09:30GMT disclosure of April's better-than-expected GfK UK consumer confidence gauge. This came in at minus 6. Minus 8 was forecast.
Touted offers at 1.9970 and 1.9980 are bull targets north of 1.9950. The latter orders have been set three pips ahead of today's Asian session top. Today's nearly 60-pip Asian session drop was attributed to US investment bank selling, allegedly on behalf of a "stressed" hedge fund. Friday's late London plunge to 1.9955, from a session high of 2.0045, was also blamed on heavy USD buying by a US fund. Friday's USD buying accompanied a rumour that a US fund was having to liquidate positions in size due to credit lines being cut back.
The BoE should up the UK base rate by 50bp to 5.75% this quarter, according to NIESR. A 25bp hike to 5.5% is expected next week (May 10). March's US annualized core deflator will be unveiled at 12:30GMT. A fall to 2.1%, from 2.4% in February, is expected.
Touted offers at 1.9970 and 1.9980 are bull targets north of 1.9950. The latter orders have been set three pips ahead of today's Asian session top. Today's nearly 60-pip Asian session drop was attributed to US investment bank selling, allegedly on behalf of a "stressed" hedge fund. Friday's late London plunge to 1.9955, from a session high of 2.0045, was also blamed on heavy USD buying by a US fund. Friday's USD buying accompanied a rumour that a US fund was having to liquidate positions in size due to credit lines being cut back.
The BoE should up the UK base rate by 50bp to 5.75% this quarter, according to NIESR. A 25bp hike to 5.5% is expected next week (May 10). March's US annualized core deflator will be unveiled at 12:30GMT. A fall to 2.1%, from 2.4% in February, is expected.
Yen Outlook (30th April 2007)
The Dollar has recovered from Friday's volatile session and has managed to maintain its push towards the 120.00 level. Late Asian position squaring gave the Yen a brief lift but the USD/JPY dip to 119.40, As Europe picked up the pace, provided batter buying levels. Talk in the Asian market of heavy cross sales from US hedge funds with EUR/JPY, AUD/JPY and GBP/JPY all hit hard.
Much of this action looks to have taken place very early in the overnight session with talk of the speculative players exploiting the thin market conditions. Early European action was Dollar biased with a bounce to 119.68 putting the 120.00 level back under pressure. There is talk of large 119.70-80 offers ahead of 119.90 expires and 120.00 barriers.
Sizeable 119.15-20 bids are also being heard. Holiday volatility and tired carry trade positions will keep the market cautious. The Yen remains vulnerable and traders will be wary as possible corrections against the carry trade hangs over the market. For today we look for a 119.35 to 119.85 range.
Much of this action looks to have taken place very early in the overnight session with talk of the speculative players exploiting the thin market conditions. Early European action was Dollar biased with a bounce to 119.68 putting the 120.00 level back under pressure. There is talk of large 119.70-80 offers ahead of 119.90 expires and 120.00 barriers.
Sizeable 119.15-20 bids are also being heard. Holiday volatility and tired carry trade positions will keep the market cautious. The Yen remains vulnerable and traders will be wary as possible corrections against the carry trade hangs over the market. For today we look for a 119.35 to 119.85 range.
Euro Outlook (30th April 2007)
Into the new week and EUR/USD was on the defensive after the Euro opened the week at far lower levels and many EUR crosses gapped lower. Asian trading saw spot sold back from 1.3653 to just shy of the 1.36 level. Stops below the figure were being eyed by bears as were downside stops in EUR/JPY, below 162.40.
Sell-stops in the 90's were removed but an Asian central bank emerged on the bid into 1.3590 to prop the pair and with the EUR/JPY stops intact the price soon began to consolidate.
1.3585 was seen as the key level below, with more stops sub-1.3580 but the failure to break lower combined with the "as-expected" Euro Zone inflation data helped force a slight bounce. Looking ahead, EZ M3 hit a 24-year high to support the view that higher rates remain in the pipeline from the ECB but the all-time highs at 1.3683 look a little away from the market with 1.3620 offers currently capping.
Option dealers note large 1.36 strikes set to mature both today and tomorrow while the short-run will see the focus turn to the core PCE deflator and the 12:30 GMT release of US March income & spending data.
Sell-stops in the 90's were removed but an Asian central bank emerged on the bid into 1.3590 to prop the pair and with the EUR/JPY stops intact the price soon began to consolidate.
1.3585 was seen as the key level below, with more stops sub-1.3580 but the failure to break lower combined with the "as-expected" Euro Zone inflation data helped force a slight bounce. Looking ahead, EZ M3 hit a 24-year high to support the view that higher rates remain in the pipeline from the ECB but the all-time highs at 1.3683 look a little away from the market with 1.3620 offers currently capping.
Option dealers note large 1.36 strikes set to mature both today and tomorrow while the short-run will see the focus turn to the core PCE deflator and the 12:30 GMT release of US March income & spending data.
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