FX morning briefing

EURO SUMMARY: Euro-dollar opened in Asia at $1.1347 this morning, toward the upper end of the $1.1175 to $1.1370 range seen yesterday, with higher bund yields, Greek optimism, softer US economic data and a slightly dovish Fed Lockhart all combining to push the euro higher. The pair however failed to extend the overnight highs and slipped off the early peak of $1./1349 in Asia today. Euro-yen selling interest weighed on euro-dollar and the pair then traded a $1.1325 low as Japanese stocks dragged most yen pairs lower. The move lower in euro-dollar then unveiled demand interest off the low, which was subsequently followed up with covering of euro shorts vs other Asian FX. Euro-dollar gained momentum on that and recovered back to the opening levels though it has yet to threaten the morning highs. Euro-dollar last trades at $1.1345. German factory orders out later in the European session the next hurdle for the Euro. Hourly support lies at $1.1315, topside resistance is located at $1.1380 (February 26 high).

EUR/USD: Recent pressure on the 21-WMA and 100-DMA resulted in a sharp break higher with focus having shifted to the $1.1451-1.1540 region where Feb highs are located. Key concerns for bulls continue to come from O/B daily studies and the Bollinger band top. In saying that, layers of support have developed with bears needing a close below the 100-DMA to ease bullish pressure and below $1.1066 to hint at a more substantial correction.

YEN SUMMARY: Dollar-yen opened in Asia at Y119.46, toward the lower end of the Y119.21 to Y120.05 range witnessed by European and US markets, weaker US economic data weighing on the US dollar. The ‘Golden Week’ holiday season ended yesterday and the return of the Tokyo market today saw Japanese stocks drop sharply in the early half of the day. The Nikkei 225 stayed weak through the morning and dragged dollar-yen lower, the pair eventually falling to a Y119.33 low. Demand noted earlier at Y119.30 successfully contained the losses and sparked a recovery as aussie-yen also rebounded off its post-jobs data lows. Dollar-yen rallied to a new session high of Y119.60 before easing again late in the session. Dollar-yen last trades at Y119.48. There’s been some talk of stops in the Y119.10/00 region, the latter also seen containing a $1.4bln expiry, before further demand interest is then seen at Y118.80 and Y118.50, according to traders. Up top, initial resistance lies at Y119.70, which is the 38.2% fibo retracement of the Y120.51 to Y119.21 fall.

USD/JPY: Bears are feeling a little more confident following Wednesday’s sell-off that saw a dip below the 100-DMA before closing below the 21-DMA (Y119.54). The Y119.69-84 resistance region is now key with bears needing a close above to ease the current bearish pressure and shift immediate focus back to Y120.50-86. While Y119.84 caps bears now focus on a break of Wednesday’s low that sees Y118.4-50 targeted with the Bollinger base noted just above.

EUR/JPY: The first close above the 100-DMA since early Jan adds support to the bullish case with focus now confirmed on layers of resistance Y136.26-137.67. In saying that, O/B daily studies remain the key concern for bulls. Bears now look for a close below Y134.02 to confirm a false break of the 100-DMA and easing bullish pressure. Overall a close below Y132.92 is needed to end bullish hopes and shift focus back to 21 & 55-DMAs Y130.40-85.

AUSSIE SUMMARY: The aussie opened in Asia at $0.7969, toward the middle of the $0.7919 to $0.8031 range seen yesterday, the bid theme in Asia spilling over into European and US markets, a widening of the Aussie/US 10 year yield one factor for the short squeeze. The spotlight this morning was on the Australian jobs data, which were released at 0130 GMT. Ahead of that, aussie-dollar was already under pressure and traded down toward $0.7950 as regional stock market saw a soft start to the day. A weak headline jobs number drove aussie-dollar sharply lower to a $0.7925 low before the market then noticed the favorable revisions in previous readings. That sparked a bounce back over $0.7950 and then on to $0.7970. That bounce put a squeeze on some short positions and aussie-dollar then extended the recovery through $0.8000 for a high of $0.8005 before the move fizzled out. It last traded at $0.7989. Traders have cited macro sell orders above $0.8000, with resistance seen at $0.8031 (May 6 high), and stops then seen above $0.8040. On the downside, stops are tipped below $0.7920 and support is located at $0.7909, which is the 50% fibo retracement of the $0.7788 to $0.8031.

STERLING SUMMARY: Cable closed in NY Wednesday at $1.5247 after rate had further extended its recovery from a pre UK svcs PMI release low of $1.5150 to $1.5291, the move driven by the sell off in bonds, dollar sales leading the move with the euro the main beneficiary. Cable dipped to $1.5221 before it recovered to $1.5267 during the US afternoon then settled between $1.5240/55 into the close. The lead rally in euro-dollar saw euro-sterling drive through recent highs of stg0.7420 to stg0.7449 closing the day at stg0.7433. Another Asian session of consolidation, following a volatile Europe-US session with cable trade contained by $1.5230/47(trading around $1.5240 into Europe) with euro-sterling contained by stg0.74385-0.7443. General Election in the UK today though exit polls/results only due after 0900GMT this evening. Opinion polls still see a very tight result making for political uncertainty. UK new car registrations provides domestic data interest though focus on US weekly jobless claims (1230GMT) ahead of Friday’s key NFP. Bond market action remains key. Cable resistance into $1.5250, stronger between $1.5290/1.5300. Support $1.5230/20, stronger toward $1.5200. Euro-sterling resistance into stg0.7450, support stg0.7420-00.

GBP/USD: The 100-DMA is now seen supporting following the recovery from below this level earlier in the week with immediate focus on the $1.5298 resistance level. 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 the 100-DMA to ease bullish pressure and below the 55-DMA ($1.5038) to end bullish hopes and shift overall focus back to 2015 lows.

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