The initial probe higher into North American trading failed to stick and as a result USD/CHF continues to trade just shy of 1.2550 with bids into 1.2525/30 looking to prop any dips.Elsewhere, a UK Clearer has backed the US investment house outlook we noted earlier.
The US name is question issued a buy recommendation to its customers for GBP/CHF, suggesting the cross could appreciate towards 2.49/50, and this upward trajectory is mirrored by a recent research note from a quality UK player.
However, the clearer does go on to discuss the potential for one-way risk in the Franc and notes that "such trends can be reversed rather violently". Currently, GBP/CHF trades back below 2.44 having failed to surmount the 2.4425 mark on its initial probe into the 44's. Bids into 2.4375/80 are expected to prop dips with more support into 2.4350.
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Monday, February 12, 2007
FX OPTIONS: EUR/USD Vols Soften, 1-Year Pivoting All-Time Low
Implied option volatilities have ticked south through the European session-to-date, with the 1-mth 5.8/5.9 last. The 1-mth expiry date currently falls on a Monday (March 12). On Friday, the 1-mth expiry date fell on an NFP Friday (March 9).Last Autumn (pre-Thanksgiving), the 1-mth plumbed an all-time double-day low of 5.4/5.6 (Nov 17 & 21).
The 1-mth started this year bid as high as 7.15 pct (Jan 2). In the mid-dates: the 3-mth is now 5.9/6.05, having been 6.0 pct bid at today's European open. The 3-mth expiry date still falls on an ECB rate verdict and press conference Thursday (May 10), as per Friday. The next-but-one FOMC meetingtakes place on May 9. At the back of the curve: the 1-year is pivoting Friday's new all-time traded low of 6.475 pct. Expiry dates courtesy of FENICS FX 2002.
The 1-mth started this year bid as high as 7.15 pct (Jan 2). In the mid-dates: the 3-mth is now 5.9/6.05, having been 6.0 pct bid at today's European open. The 3-mth expiry date still falls on an ECB rate verdict and press conference Thursday (May 10), as per Friday. The next-but-one FOMC meetingtakes place on May 9. At the back of the curve: the 1-year is pivoting Friday's new all-time traded low of 6.475 pct. Expiry dates courtesy of FENICS FX 2002.
EUR/USD: Familiar Support Zone Cushions Fall
After falling back beneath 1.2950, EUR/USD losses moderated as prices reached a familiar zone of support where central banks have been accumulating reserves formuch of 2007. Jittery price action in EUR/JPY helped dictate EUR/USD flows this morning after the cross initially rallied following the G7.
The Group failed to single out the JPY for scorn but Trichet went out of his way to warn the market from falling for "one-way" bets. Also influencing EUR/USD price action this morning are moves in the USD index. The index bumped up against a downtrend in place almost a year at the 0.8516 level this morning as well as the 200-day moving average at 0.8513.
It trades now at 0.8510. EUR/USD resistance lies overhead in the 1.2975/85 area near-term while bids are scattered all the way down. The 100-day moving average has climbed to 1.2917. Big bounces have been seen from that average in recent weeks. EUR/USD trades at 1.2959.
The Group failed to single out the JPY for scorn but Trichet went out of his way to warn the market from falling for "one-way" bets. Also influencing EUR/USD price action this morning are moves in the USD index. The index bumped up against a downtrend in place almost a year at the 0.8516 level this morning as well as the 200-day moving average at 0.8513.
It trades now at 0.8510. EUR/USD resistance lies overhead in the 1.2975/85 area near-term while bids are scattered all the way down. The 100-day moving average has climbed to 1.2917. Big bounces have been seen from that average in recent weeks. EUR/USD trades at 1.2959.
Swiss Outlook (12th February 2007)
The Franc continued to feel the pressure in the wake of the G7 as the meeting failed to make mention of the "Yen weakness". This effective green light to renewed carry trades saw the CHF sold against higher yielding currencies. Swiss and US sell interest in USD/CHF into 1.2520 was soon absorbed as funds, short-term players and other US investment interest bought.
UK Clearers played both sides and the stops above 1.2525 were triggered on routeto the session high at 1.2547. On the topside, bulls now eye 1.2570/75 as a viable short-term target.On the crosses, offers in EUR/CHF into 1.6255/60 cap with the historic high at 1.6277 above before the speculated 1.6280 exotics and the confirmed 1.6300 barriers. GBP/CHF was forced higher after a bullish buy recommendation from a quality US name.
Offers into 2.44 are capping the move higher for the moment buta break higher is eyed and 2.4450 will then come into view. The research note claimed 2.49/50 was a viable upside target, however, we at IFR would look first to the 2.4759 07 yearly high.
UK Clearers played both sides and the stops above 1.2525 were triggered on routeto the session high at 1.2547. On the topside, bulls now eye 1.2570/75 as a viable short-term target.On the crosses, offers in EUR/CHF into 1.6255/60 cap with the historic high at 1.6277 above before the speculated 1.6280 exotics and the confirmed 1.6300 barriers. GBP/CHF was forced higher after a bullish buy recommendation from a quality US name.
Offers into 2.44 are capping the move higher for the moment buta break higher is eyed and 2.4450 will then come into view. The research note claimed 2.49/50 was a viable upside target, however, we at IFR would look first to the 2.4759 07 yearly high.
Sterling Outlook (12th February 2007)
Cable fell to a one-month low of 1.9438 following the 09:30GMT disclosure of January's much steeper-than-expected decline in UK input producer prices. These tumbled by 2.0% m/m and 1.7% y/y, against forecast falls of 0.7% m/m, 0.2% y/y. The large input PPI drop is good news for doves arguing that the peak of the UK base rate tightening cycle has already been reached.
Softer-than-expected UK inflation figures at 09:30GMT tomorrow, and a relativelydovish BoE inflation report on Wednesday, could spur further GBP selling. Annualized CPI is expected to tick south from an 11-year high of 3.0%. Touted support points/bear targets south of 1.9438 include 1.9427 (Jan 12 base),1.9410, 1.9385, 1.9317 (Jan 10 floor), 1.9280, and 1.9260 (Jan 8 low). 1.9467 (Friday's NY session base) defines the rebound high from 1.9438.
Upper obstacles include 1.9480 (today's Asian session low), 1.9500, and 1.9520. This week's key US event risk is Bernanke's monetary policy testimony to Congress on Wednesday and Thursday. US Treasury Secretary Paulson says a strong USD is in the interest of the U.S (FAZ/Reuters).
Softer-than-expected UK inflation figures at 09:30GMT tomorrow, and a relativelydovish BoE inflation report on Wednesday, could spur further GBP selling. Annualized CPI is expected to tick south from an 11-year high of 3.0%. Touted support points/bear targets south of 1.9438 include 1.9427 (Jan 12 base),1.9410, 1.9385, 1.9317 (Jan 10 floor), 1.9280, and 1.9260 (Jan 8 low). 1.9467 (Friday's NY session base) defines the rebound high from 1.9438.
Upper obstacles include 1.9480 (today's Asian session low), 1.9500, and 1.9520. This week's key US event risk is Bernanke's monetary policy testimony to Congress on Wednesday and Thursday. US Treasury Secretary Paulson says a strong USD is in the interest of the U.S (FAZ/Reuters).
Yen Outlook (12th February 2007)
The Yen slipped lower vs the Dollar following the G-7 meeting, where it received no direct support from the group of seven officials. The Tokyo holiday may well have dampened down overall overnight trade. USD/JPY climbed to 122.10, helped in part by a sizeable buy order from a leading US investment bank.
Disappointment that there was no official support for the Japanese unit and that the concerns, recently expressed by European officials, were not discussed. However, the G-7 warning over carry trades may have sweetened the pill somewhat. Overall the market appears to be of the opinion that the Yen will remain soft. USD/JPY peaked at 122.10 early in Asia, slipped to 121.85 and then traded sideways between 121.90-122.05 until Europe nudged price down to 121.77-80.
The market is very short the Yen and with the threat of sizeable Japanese-financial year end repatriation traders will be wary of pushing USD/JPY too far. There is risk of a drop to 121.50 and possibly a return to a 121.00-121.45 trading range,seen late last week. There is talk of 121.50 option expiries today.
Disappointment that there was no official support for the Japanese unit and that the concerns, recently expressed by European officials, were not discussed. However, the G-7 warning over carry trades may have sweetened the pill somewhat. Overall the market appears to be of the opinion that the Yen will remain soft. USD/JPY peaked at 122.10 early in Asia, slipped to 121.85 and then traded sideways between 121.90-122.05 until Europe nudged price down to 121.77-80.
The market is very short the Yen and with the threat of sizeable Japanese-financial year end repatriation traders will be wary of pushing USD/JPY too far. There is risk of a drop to 121.50 and possibly a return to a 121.00-121.45 trading range,seen late last week. There is talk of 121.50 option expiries today.
Euro Outlook (12th February 2007)
The EUR/JPY fresh record high at 159.00 had offered the price some support but the subsequent failure and sell-off weighed. Offers from 1.3040 back to 1.3050 limited any thoughts of topside action, sales then increased on players returning to their previous long-USD positions. Spot eased and was soon testing the 1.30 mark and cable selling, in the wake of the soft PPI, added further weight.
Trading then began filling the support from 1.2990 back to 1.2980 before running the sub-1.2975 stops en route to 1.2950.Looking ahead, there is little data set for release into the North American session. However, if the markets take heart from the European theme then EUR/USD will again focus on the 1.2915 pre-G7 low.
Bids into 1.2950 stalled the initial move lower but these will soon succumb to any increase in selling volume. Stops are noted below with the 1.2925 area the next stalling point.Technically, the move lower needs to clear 1.2915 if the downside is to take hold. The 1.2865-85 support zone looks key to any USD break higher with the 2007low currently helped by the 1% MA band base.
Trading then began filling the support from 1.2990 back to 1.2980 before running the sub-1.2975 stops en route to 1.2950.Looking ahead, there is little data set for release into the North American session. However, if the markets take heart from the European theme then EUR/USD will again focus on the 1.2915 pre-G7 low.
Bids into 1.2950 stalled the initial move lower but these will soon succumb to any increase in selling volume. Stops are noted below with the 1.2925 area the next stalling point.Technically, the move lower needs to clear 1.2915 if the downside is to take hold. The 1.2865-85 support zone looks key to any USD break higher with the 2007low currently helped by the 1% MA band base.
Saturday, February 10, 2007
EUR/JPY: Trend Intensity Signal Remains Neutral
The trend intensity signal for EUR/JPY remains neutral at18 with the signal still consolidating and above trend-ready levels of 13 or below. The EUR/GBP trend signal is neutral at 21. The EUR/USD trend signal is neutral at trend-ready levels of 11 as is GBP/USD.
The USD/JPY trend signal is neutral at 27 and the USD/CHF trend signal is neutral at 20. These proprietary indicators are updated each trading day after the NY close.
The USD/JPY trend signal is neutral at 27 and the USD/CHF trend signal is neutral at 20. These proprietary indicators are updated each trading day after the NY close.
GBP/USD: Consolidating Oversold Conditions
Since failing to overcome the 1.9750 resistance point earlier this week, GBP/USD has shed over 61.8% of its rise from 1.9260. Trendline support at 1.9545 was snappedin the process and the pound looks set for lower levels once it consolidates some of today's big losses.
The lack of a February rate hike from the MPC has been a big catalyst for weakness this weeks as has M&A flows out of the UK as British corporates take advantage of the lofty pound to launch cash bids for overseas assets.
The latest was today's nearly GBP2 bln takeover of US bus operator Laidlaw by a UK firm. Offers are seen between 1.9500 and 1.9520 near-term on rebounds with more toward1.9545/50. Support comes in at 1.9455/60 and 1.9425. Cable trades now at 1.9482.
The lack of a February rate hike from the MPC has been a big catalyst for weakness this weeks as has M&A flows out of the UK as British corporates take advantage of the lofty pound to launch cash bids for overseas assets.
The latest was today's nearly GBP2 bln takeover of US bus operator Laidlaw by a UK firm. Offers are seen between 1.9500 and 1.9520 near-term on rebounds with more toward1.9545/50. Support comes in at 1.9455/60 and 1.9425. Cable trades now at 1.9482.
USD/JPY: Paulson Reiterates JPY Set in Competitive Market
Paulson also states that the JPY reflects economic fundamentals. Thecomments continue to underpin USD/JPY which trades at 121.69/71. Paulson also targets China stating that China must develop capital markets to sustain growth.
US FED: Poole - Prepared to Raise Rates, No Hurry
FRB St. Louis President Poole (voter) says inflation expectations are well anchored but the Fed stands ready to raise rates if need be. As if to allay fears of an impending move, Poole says the Fed is in no hurry to respond to incoming data that show the economy returning to potential.
He says there is notimetable to return the core PCE price index to within the comfort level. Thereis no official inflation target, but the implicit upper band is 2% on the core PCE deflator.
Earlier today, Poole was upbeat on the economy's "firmer tone." Fed funds futures are little changed on the session with no change given by any contract before July. The biggest odds for a 25 bps rate cut are given by the October contract, last giving an implied probability of 34%.
He says there is notimetable to return the core PCE price index to within the comfort level. Thereis no official inflation target, but the implicit upper band is 2% on the core PCE deflator.
Earlier today, Poole was upbeat on the economy's "firmer tone." Fed funds futures are little changed on the session with no change given by any contract before July. The biggest odds for a 25 bps rate cut are given by the October contract, last giving an implied probability of 34%.
USD/JPY: Japan Polls Shows 50% Still See BOJ Feb Rate Hike
The Nikkei reports this morning that a poll from the Economic Planning Association in Japan still shows that 50% of economists expectthe BOJ to raise rates this month. The report notes that 18 out of 35 expect therate rise, up from 11 in last month's survey.
USD/JPY trades at 121.72, getting a boost from the comments from EU Alumnia on forex, underpinning signs that the G7 will not make a forceful statement this weekend on the JPY. Good offers are still stalling gains at 121.75/80 though some stops are tipped above 121.80 but more selling is tipped at 122.00. Rising US bond yields, with ten year yields now at 4.78%, up from 4.74% this morning, are helping to underpin the USD.
USD/JPY trades at 121.72, getting a boost from the comments from EU Alumnia on forex, underpinning signs that the G7 will not make a forceful statement this weekend on the JPY. Good offers are still stalling gains at 121.75/80 though some stops are tipped above 121.80 but more selling is tipped at 122.00. Rising US bond yields, with ten year yields now at 4.78%, up from 4.74% this morning, are helping to underpin the USD.
USD/CHF: Overnight Orders Cap Rally
US traders report that despite leveraged accounts squaring shorts out of Europe, heading for the exits for an early close, USD/CHF is still having trouble breaking out on the topside. Strong orders in the 1.2520-25 area, attributed to European semi-official offers, and commercial hedgers are holding the greenback back.
The range in NY has been 1.2495/20 for the past hour and a half and spot traders have no reason to believe that should change any time soon, with spot currently at 1.2505. Earlier reports of a very large Swiss bank selling GBP/CHF either on behalf of a large European central bank or M&A related (most market participants are on the latter) also have encouraged US participants to sell rallies. There are light stops above 1.2525, and heavy stops at 1.2580-85.
The range in NY has been 1.2495/20 for the past hour and a half and spot traders have no reason to believe that should change any time soon, with spot currently at 1.2505. Earlier reports of a very large Swiss bank selling GBP/CHF either on behalf of a large European central bank or M&A related (most market participants are on the latter) also have encouraged US participants to sell rallies. There are light stops above 1.2525, and heavy stops at 1.2580-85.
EUR/USD: Dealers Keeping Eyes Open for Draft Statement
Very often, the G7 communique is drafted well before the first finance minister turns up at the meeting. As such, copies of the draft communique often find their way into the media at some point on the Friday of the two-day meeting.
Dealers are keeping their eyes on the tape for just such a leak in the next few hours. No mention of the JPY is expected. EUR/USD remains weighed down with the USD fairly buoyant in recent ranges. Range is the operative word here, and no big breakout is expected ahead of the weekend, to be sure. EUR/USD trades at 1.2991.
Dealers are keeping their eyes on the tape for just such a leak in the next few hours. No mention of the JPY is expected. EUR/USD remains weighed down with the USD fairly buoyant in recent ranges. Range is the operative word here, and no big breakout is expected ahead of the weekend, to be sure. EUR/USD trades at 1.2991.
US TECHS: Commodities Outlook; Gold and Oil
[Gold] has met one upside objective today with the continuation higher. On nearest futures charts (COMEX), the market has come within $1 of retesting its mid-July top at $669. With the breakout from the just-over-six-month-old symmetrical triangle, technical objectives are vastly higher (though it can be argued that the pattern is a bit too stretched out to have confidence that classic measuring techniques apply in the current case).
Let's give the bulls the benefit of any doubt, as those same continuous contract charts show a gap higher with today's rise, very possibly of the breakaway variety. Weekly and monthly targets still point to the $675-76 zone as next resistance; a surge pastmeans $700 is next.
In Mar [oil], we have been eager to advance the notion that a correction hasstarted and may yet be proven correct, though not exactly on the timetable at first thought. Evidence in favor of the correction notion is that prices have come within 20 cents of Nov floors at $60.61 and momentum and RSI studies have not yet shown bulls are in control.
The market is slightly past its 50-day moving average today at $59.61 Mar. In the event of an "overshoot," 200-day moving averages on continuous futures charts are just over $62 and Dec peaks are$64.15, either of which could mark a turning point for a major correction.
Let's give the bulls the benefit of any doubt, as those same continuous contract charts show a gap higher with today's rise, very possibly of the breakaway variety. Weekly and monthly targets still point to the $675-76 zone as next resistance; a surge pastmeans $700 is next.
In Mar [oil], we have been eager to advance the notion that a correction hasstarted and may yet be proven correct, though not exactly on the timetable at first thought. Evidence in favor of the correction notion is that prices have come within 20 cents of Nov floors at $60.61 and momentum and RSI studies have not yet shown bulls are in control.
The market is slightly past its 50-day moving average today at $59.61 Mar. In the event of an "overshoot," 200-day moving averages on continuous futures charts are just over $62 and Dec peaks are$64.15, either of which could mark a turning point for a major correction.
Swiss Outlook (9th February 2007)
Into European trading and the Franc was again sold as cash & carry traders failed to take heed of the pre-G7 risk. USD/CHF worked higher in tandem with the broader US unit strength and offers into 1.2490/2500 were found to limit the initial run higher. However, these were soon absorbed and spot broke higher and consolidated in the low 1.25's. Offers are noted 1.2520/25 with stops tight above and more above 1.2540.
[GBP/CHF] selling from UK Clearers, Swiss names and funds was initially tipped as unwinding of carry trades but dealers then U-turned to settle on M&A flows as the cause. Trading dropped from 2.4450 to 2.4318 but has since steadied and is now looking to bounce.
[EUR/CHF] traded at fresh historic highs in Asian trading but the GBP/CHF sales weighed in Europe. The pair dropped to 1.6235 before fresh supportemerged. On the topside, 1.6300 option barriers are still targeted by bulls.Looking ahead, G7 dominates the event-risk profile but ahead of the Essen meeting and the market must navigate past a bunch of Poole and Pianalto commentsand the weekly US ECRI numbers.
[GBP/CHF] selling from UK Clearers, Swiss names and funds was initially tipped as unwinding of carry trades but dealers then U-turned to settle on M&A flows as the cause. Trading dropped from 2.4450 to 2.4318 but has since steadied and is now looking to bounce.
[EUR/CHF] traded at fresh historic highs in Asian trading but the GBP/CHF sales weighed in Europe. The pair dropped to 1.6235 before fresh supportemerged. On the topside, 1.6300 option barriers are still targeted by bulls.Looking ahead, G7 dominates the event-risk profile but ahead of the Essen meeting and the market must navigate past a bunch of Poole and Pianalto commentsand the weekly US ECRI numbers.
Sterling Outlook (9th February 2007)
The pound came under fresh selling pressure from today's European open, with news that FirstGroup is to buy Laidlaw for $3.6bn cash (FT website) helping weigh. A UK clearer reportedly sold a lot of GBP, with model funds joining in after cable's break below 1.9550. Swiss name selling of GBP/CHFwas also noted.
M&A-flow was mooted as the cause of the GBP/CHF selling. GBP/USD stops below 1.9483 (Jan 31 low) were tripped, en route to a 4-week low of 1.9459, after the 09:30GMT disclosure of December's higher-than-expected UK trade deficit. This came in at GBP 7.142bn. It was forecast at GBP 6.9bn. Sterling's recovery rally from 1.9459 ran into resistance at 1.9500.
Above figure obstacles include 1.9525, 1.9550, 1.9575, and 1.9600.Touted bear targets south of 1.9459 include 1.9427 (Jan 12 low), 1.9410, 1.9317 (Jan 10 base), 1.9300, 1.9280, and 1.9260 (Jan 8 floor). UK January inflation data is due next Tuesday, with the BoE quarterly inflation report published next Wednesday. Centrica has announced large gas and electricity price cuts from March 12 (FT, p3).
M&A-flow was mooted as the cause of the GBP/CHF selling. GBP/USD stops below 1.9483 (Jan 31 low) were tripped, en route to a 4-week low of 1.9459, after the 09:30GMT disclosure of December's higher-than-expected UK trade deficit. This came in at GBP 7.142bn. It was forecast at GBP 6.9bn. Sterling's recovery rally from 1.9459 ran into resistance at 1.9500.
Above figure obstacles include 1.9525, 1.9550, 1.9575, and 1.9600.Touted bear targets south of 1.9459 include 1.9427 (Jan 12 low), 1.9410, 1.9317 (Jan 10 base), 1.9300, 1.9280, and 1.9260 (Jan 8 floor). UK January inflation data is due next Tuesday, with the BoE quarterly inflation report published next Wednesday. Centrica has announced large gas and electricity price cuts from March 12 (FT, p3).
Yen Outlook (9th February 2007)
USD/JPY and the JPY crosses marked time as the G7 meetinggot underway. There was some early nervousness in the wake of a large sell orderin GBP/JPY. The interest forced USD/JPY from the 121.50 area back into 121.25 and sent EUR/JPY 70 pips lower from 158.35 down to 157.65.
JPY continued its familiar theme once the order was filled, with US investment house demand for EUR/JPY and Japanese demand for USD/JPY seeing tentative upside bias. EUR/JPY recaptured 158.00 and USD/JPY moved on 121.50. An unnamed European official claimed there was nothing G7 could do about JPY and it was only Japan that couldaddress weakness. JPY weakened on the news, with USD/JPY trading up to 121.56 and EUR/JPY trading up to 158.20.
Both pairs were unable to sustain gains, with the market drawing the conclusion that Japan could come under pressure behind closed doors even if the communique did not specifically mention JPY. Pullbacks in both pairs are limited, with USD/JPY spending the remainder of the session close to 121.50 and EUR/JPY hovering around the 158.00 area. Choppy price actionwill continue while players wait for any concrete news from the G7.
JPY continued its familiar theme once the order was filled, with US investment house demand for EUR/JPY and Japanese demand for USD/JPY seeing tentative upside bias. EUR/JPY recaptured 158.00 and USD/JPY moved on 121.50. An unnamed European official claimed there was nothing G7 could do about JPY and it was only Japan that couldaddress weakness. JPY weakened on the news, with USD/JPY trading up to 121.56 and EUR/JPY trading up to 158.20.
Both pairs were unable to sustain gains, with the market drawing the conclusion that Japan could come under pressure behind closed doors even if the communique did not specifically mention JPY. Pullbacks in both pairs are limited, with USD/JPY spending the remainder of the session close to 121.50 and EUR/JPY hovering around the 158.00 area. Choppy price actionwill continue while players wait for any concrete news from the G7.
Euro Outlook (9th February 2007)
Into European trading and the option related supply from 1.3040 back to 1.3050, linked to expiries, left the topside looking limited. As a result of this and the broader Dollar rally, linked to G7 Yen & Yuan speculation, the pair worked lower.
Bids into the 1.3000 area were always expected to prop and with the eastern European (that sold yesterday) then found on the bid the price looked to stabilize. Add the mix another quality player on the bid and the price attempted to rebound. Offers around 1.3015 kept the pressure on the downside and speculative sales increased as cable was impacted by poor UK data. Spot moved lower once more, ECB rhetoric also weighed, and the price edged below 1.30.
Asian C/B bids into 1.2990 then emerged to prop but European-led sales cap as the sub-1.2980 stops are eyed.Looking ahead, a push below 1.2980 will put the pair on course for a run at 1.2950 but the Euro remains supported by cross flows and the continual support of reserve managers. As a result stall near the lows is expected with a rebound likely after the topside expiries have rolled-off.
Bids into the 1.3000 area were always expected to prop and with the eastern European (that sold yesterday) then found on the bid the price looked to stabilize. Add the mix another quality player on the bid and the price attempted to rebound. Offers around 1.3015 kept the pressure on the downside and speculative sales increased as cable was impacted by poor UK data. Spot moved lower once more, ECB rhetoric also weighed, and the price edged below 1.30.
Asian C/B bids into 1.2990 then emerged to prop but European-led sales cap as the sub-1.2980 stops are eyed.Looking ahead, a push below 1.2980 will put the pair on course for a run at 1.2950 but the Euro remains supported by cross flows and the continual support of reserve managers. As a result stall near the lows is expected with a rebound likely after the topside expiries have rolled-off.
Thursday, February 08, 2007
USD/JPY: Capped Ahead Of 121, Still More Bouyant, G7 Wait
From a low of 120.00 in Asia and a late high around 120.50, USD/JPY traded on toa high of 120.82 in New York overnight. It has come down a bit since on the backof easier US interest rates but remains buoyant with dealers noting that JPY buy-backs ahead of the weekend G7 meeting have subsided.
If there is no mention of JPY in the G7 communique, players seem ready to sell JPY again, perhaps taking it back above 121.00 early next week. In the meantime, offers from mediumterm longs still looking to pare back positions are seen from the 120.80-90 level, and look to trail higher up to 121.00 and above. Japanese exporters are likely to have some USD to go up top, mostly residuals for the fiscal year to end in March.
Toyota upped its assumed USD/JPY rate for the current fiscal year to 116 from 115 and stands to reap large windfall profits from the exchange rateeven at current levels. Other exporters will likely see the same. Support below is seen just below in the 120.50-60 level, previous resistance and 120.53 the low in New York overnight. London saw a low of 120.36. USD/JPY currently trades 120.62/65.
If there is no mention of JPY in the G7 communique, players seem ready to sell JPY again, perhaps taking it back above 121.00 early next week. In the meantime, offers from mediumterm longs still looking to pare back positions are seen from the 120.80-90 level, and look to trail higher up to 121.00 and above. Japanese exporters are likely to have some USD to go up top, mostly residuals for the fiscal year to end in March.
Toyota upped its assumed USD/JPY rate for the current fiscal year to 116 from 115 and stands to reap large windfall profits from the exchange rateeven at current levels. Other exporters will likely see the same. Support below is seen just below in the 120.50-60 level, previous resistance and 120.53 the low in New York overnight. London saw a low of 120.36. USD/JPY currently trades 120.62/65.
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