FX morning briefing

EURO SUMMARY: The euro opened in Asia at $1.1200, unchanged from the close in New York on Friday, and then held a tight $1.1180 to $1.1210 range in early dealings. There was minor downside seen after weekend news reports about Greece and its ongoing debt problems but the impact on euro sentiment was not significant.

Euro held just off $1.1200 through the early few hours of the session before slipping to a new low for the morning at $1.1177, as the aussie weakened following the release of a disappointing HSBC final China PMI reading. Euro-dollar’s losses were contained at that low, and it then retraced slightly higher after that, taking back $1.1198 before another round of losses was then seen. Euro-dollar last trades at $1.1191. Further sideways consolidation is expected with London also closed for a holiday today, German and Eurozone Manufacturing PMI the next focus for attention, due later today in the European session. Initial support is located at $1.1175 (May 1 low) while resistance is located at $1.1219.

EUR/USD: Cracks are starting to appear in the up-trend following the 100-DMA and 21-WMA capping last week combined with a lack of topside follow through Friday and O/B daily studies looking to correct. Initial support is noted at $1.1174 today with bears needing a close below to add weight to their case for a correction with below $1.1071 shifting immediate focus to $1.0844-1.0959. Bulls now look for a close above Friday’s high.

YEN SUMMARY: Dollar-yen started the day at Y120.11 this morning, barely changed from Friday’s close in New York, and initially found itself stuck in a narrow Y120.11 to Y120.26 range. It is a holiday in Japan today, and with markets closed through Wednesday, there was little fresh news to influence the market. The pair traded soft as the morning wore on, some players noting fairly large sell orders in dollar-yen and yen crosses from offshore corporate names weighing. Dollar-yen fell to Y120.10 and then followed aussie-yen and euro-yen further down to a low of Y120.03, which also matched the top of the daily Ichimoku cloud, before a very weak bounce was then seen. It marginally extended the low to Y120.00 in the early afternoon and last trades at Y120.08. Euro-yen meanwhile last trades at Y134.39 after it opened at Y134.60 this morning. The cross traded a Y134.27 to Y134.68 range through the morning.

USD/JPY: The recovery from the Y118.24-46 support region last week resulted in closes above key DMAs Friday that now sees bulls regain the upper hand with immediate focus having shifted to the Y120.86-121.21 region. Layers of keysupport are now clustered tightly Y119.30-119.81 with bears needing a close below the 100-DMA to end bullish hopes and shift focus back to the Y118.24-46 region. Daily studies are perfectly placed for a fresh leg higher.

EUR/JPY: The rally that began from fresh 2015 lows saw the pair flirting with the 100-DMA Friday although the failure to close above is an issue when combined with O/B daily studies and the proximity of the Bollinger band top. In saying that, bears now look for a close below Y133.69 to confirm an easing of bullish pressure with below Y132.92 needed to shift focus back to the Y129.71-130.83 region where 21& 200-DMAs are located.

AUSSIE SUMMARY: The aussie opened in Asia at $0.7839, and was held within a $0.7803 to $0.7845 range through the morning today. Early sellers above $0.7840 where predominantly leverage funds, sparked into life as the odds of a RBA 25bp cut increased to 80% from 73% earlier. Demand meanwhile was seen around $0.7810 from local corporates driving the aussie back toward $0.7837. Better-than-expected Australian building approvals and ANZ job ads data did little to encourage fresh buyers, however, disappointing HSBC China final manufacturing PMI brought a wave of fresh selling against the aussie with the pair then falling sharply from $0.7830 to $0.7803. As support near the 50% fibo retracement at $0.7804 ($0.7533 to $0.8076 rise) managed to hold and Dalian iron ore price rose above 3.0% for the session, intraday shorts covered their positions lifting aussie-dollar back to around $0.7831, with the aussie last at $0.7825. If that earlier $0.7804 support breaks, the aussie is seen targeting the 61.8% mark at $0.7740, with stops below $0.7750 then at risk ahead of tomorrow’s RBA decision.

STERLING SUMMARY: Cable closed in NY Friday at $1.5148 after sterling had been pressed lower following the release of weaker than forecast UK mfg PMI data. Cable had seen highs pre release of $1.5397 before selling set in and rate was pressed to a low of $1.5115. Move was seen ahead of the long UK weekend (Holiday today) as well as positioning ahead of Thursday’s UK election. A slow start into the Asian session has seen rate consolidate Friday’s easing between $1.5136/65, trading around $1.5153 ahead of the European open. Euro-sterling, which has been a key driver of the sterling sell off, extended its recent recovery to stg0.7420, before closing the week at stg0.7390. Through Asia the rate has consolidated between stg0.73805/0.7390. With the UK closed Monday attention will turn to EZ PMI data this morning, switching over to US NY ISM and Factory Orders out of the US into the afternoon. Greece debt concerns continue as a background influence, mainly in European morning trade, with UST yields in focus in US trade. UK election Thursday, with expectation that there will be no clear winner with an overall majority, seen providing for political uncertainty. Cable resistance $1.5165, $1.5200, $1.5220/25. Support $1.5136, $1.5115/00.

GBP/USD: The cracks that appeared in the up-trend last week resulted in a sell-off and close below the 100-DMA ($1.5161) that sees focus having shifted to the 21 & 55-DMAs. Overall bears now look for a close below the 21-DMA to confirm an end to bullish hopes and to shift focus back to the 2015 low. Layers of resistance are now accumulating with bulls needing a close back above $1.5324 to regain the upper hand and $1.5555.

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