FX morning briefing

A dull morning for the euro today after it opened at $1.1185 in Asia. Some news out overnight on Greece was largely absorbed by the market and euro-dollar saw just a minor pullback to $1.1178 in initial dealings today. It then held between that and $1.1187 over the next few hours before another dip to a $1.1175 session low. That move uncovered demand interest, which pulled euro-dollar up for a stronger rally to $1.1195 as the aussie also rebounded off its lows. Late in the Asian session, euro-dollar woke from its early slumber and broke out of the morning’s range. The pair ran through a $1.1225 option strike, move said to have been driven by demand from real money and macro names, to a high of $1.1242. But sellers are noted just ahead from $1.1245. The pair last trades at $1.1224. Beyond that, further offers are noted at $1.1250, with the 100-day moving average then coming in at $1.1261. On the downside, there are orders related to reported expiries at $1.1160/50, with sell-stops then noted should $1.1140 break.

EUR/USD: O/B daily studies and key resistance layers $1.1249-1.1312 remain key concerns for bulls with a close above the 100-DMA needed to add support to the bullish case for a test of the $1.1394-1.1540 region. Initial support is noted on the hourlies at $1.1174 with bears needing a close below to add weight to their case for a correction although a close below $1.1066 is needed to confirm a shift in focus to $1.0873-1.0959.

YEN SUMMARY: Dollar-yen opened in Asia at Y119.85 this morning, toward the low end of the Y119.73 to Y120.51 range witnessed by European and US markets yesterday, weaker equities and poor US trade data keeping the US dollar on the backfoot. The Tokyo market was again absent today, celebrating the last of the ‘Golden week’ holidays and hence keeping yen pairs holding subdued ranges through the morning. Dollar-yen crept higher from early in the day but hesitated to test Y120.00. It briefly poked through but got as high as Y120.05 before turning lower. Late morning to early afternoon consolidation saw the pair hold a Y119.90/98 range and it last trades Y119.94. Initial demand has been mentioned at Y119.50 and at Y119.20 with further demand then in the Y119.10/00 region, while up top, minor stops are seen at Y120.25 . Support is located at Y119.50, which is the 50% fibo retracement of the Y118.50 to Y120.51 rise. Euro-yen opened at Y134.06 this morning and rose through the morning in line with dollar-yen. It then extended the earlier high as euro-dollar then rallied, and last traded at Y134.67, after a Y134.03 to Y134.79 range today.

USD/JPY: The correction lower and relatively bearish close Tuesday is a concern for bulls and sees immediate pressure having returned to the Y119.35-69 support region where 21 & 100-DMAs are located. Overall bears need a close below the 100-DMA to end bullish hopes and shift focus back to the Y118.24-46 region. While the 100-DMA supports bulls hold out hope for further topside with daily studies well placed for a fresh leg higher.

EUR/JPY: Bulls are again trying to take the pair above the 100-DMA (Y134.35)with a close above needed to confirm immediate focus on layers of resistance Y136.26-137.67 where the 200-DMA is located. The Y132.92 level confirmed significance as support with the pair having bounced from ahead of this level Tuesday. Bears now need a close below Y132.92 to confirm an easing of bullish pressure and to shift focus back to 21 & 55-DMAs Y130.07-130.78.

AUSSIE SUMMARY: The aussie opened in Asia at $0.7942, the initial move was down as local traders hit the sell button, the selling said to be in sympathy with the sharp fall in Kiwi following the disappointing NZ unemployment data. The pair quickly fell to a session low of $0.7919. As the kiwi stabilized, aussie shorts then began to ran for cover, with macro accounts heavy buyers of aussie-kiwi, a number of banks now expecting the RBNZ to rates this year, pushing the aussie up to $0.7951. From then on, dips remained shallow, modest US dollar weakness was then seen in other pairs, which eventually overflowed to the aussie, another rise in iron ore prices also fuelled sentiment and pushed the aussie higher. Light stops above $0.7960 were triggered, and the pair then hit a session high of $0.7975 before easing slightly into the European open, and last traded at $0.7969. Sellers are tipped between $0.7980 and $0.7985, more above $0.8000, while local corporate demand is cited on an approach to $0.7920.

STERLING SUMMARY: Cable closed in NY Tuesday at $1.5178 after rate had recovered off a UK construction PMI react low of $1.5088 to a post London fix high of $1.5218, with the move up seen on dollar weakness and led by euro-dollar’s stronger recovery. Cable eased to $1.5166 during the US afternoon before recovering into the close. Asia began slowly with cable holding around $1.5180 before it eased to retest that late US pullback low of $1.5166. The dip again attracted demand and allowed rate to lift through the balance of the Asian session to a high of $1.5216, with rate holding firm into Europe. Move was again led by euro-dollar. This strong euro recovery was reflected in euro-sterling, the rate having seen corrective pullback lows of stg0.73155 in Europe Tuesday only to push up to stg0.7383 in NY, extending this move to stg0.7391. Rate has since settled between stg0.7380/85 ahead of the European open. UK services/composite data due at 0830GMT, following EZ releases, provides the morning’s domestic interest, with EZ retail sales at 0900GMT of interest. Market seen gearing up for Friday’s NFP release, with recent dollar longs getting pared back. Cable offers $1.5220, $1.5240/50. Support $1.5166, $1.5135/30.

GBP/USD: Bears have so far been unable to capitalise on recent closes below the 100-DMA ($1.5152) although bulls continue to look for a close above $1.5298 to reconfirm overall focus on the $1.5500-55 region. Bears now need a close below $1.5154 to add weight to their case. Overall the 21-DMA remains key support with bears needing a close below to confirm a bearish bias and overall focus on 2015 lows.

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