Briefing
Dollar-yen spent much of the early Asian session stuck in a narrow Y90.25/45 range, awaiting the BOJ’s policy decision. However, as the BOJ moved to increase its liquidity scheme, the pair fell to a Y90.02 session low (buy rumour, sell fact) but then rallied sharply as it failed to test support at Y90.00, with recovery also influenced as 2-yr JGB’s falling to 4-year lows.
Short-covering and black box buying then helped a broad dollar recovery, with dollar-yen breaking out on the upper end of the range, to set a session high at Y90.67. Traders say exporter offers from Y90.80 to Y91.00 are capping gains from here. Traders noted decent demand for euro-yen from a US name which also helped to cushion the post-BOJ sell off, and they are said to have ongoing buy interest.
Euro
Euro-dollar was tied to a very narrow $1.3759/88 range in Asia, with little fresh news to move the pair. Hoever, a reported option barrier at $1.3800 has been targeted and triggered in early European trade, the rate touching a high of $1.3805 before running into profit-taking supply following the pressured move.
The pullback remains shallow and this is seen keeping focus on the upside, one trader suggests. Next barrier is noted at $1.3850 with offers ahead expected to begin from around $1.3825 through to this level, with other traders also mentioning that layered stops are seen in place from $1.3830 through to $1.3855.
RES 4: $1.3920 55-day moving average
RES 3: $1.3853/73 Low 1 Feb, 38.2% retracement of Jan/Mar decline
RES 2: $1.3838/39 High 9 Feb, 55-DMA, 23.6% of Dec/Mar decline
RES 1: $1.3796 Bollinger band, High 12 March
CURRENT LEVEL: $1.3782
SUP 1: $1.3625 21-day moving average
SUP 2: $1.3530 Low 5 March
SUP 3: $1.3460 Current Bollinger band base
SUP 4: $1.3420/37 76.4% of April/Dec rally, Low 2 Mar
Yen
Open Dollar-yen Y90.57 and Y124.87 Dollar-yen spent much of early Wednesday’s session stuck in a narrow Y90.25/45 range, awaiting the BOJ’s policy decision. However, as the BOJ moved to increase its liquidity scheme, the pair fell to Y90.05 session lows, but rallied sharply as it failed to test support at Y90.00. Short-covering and black box buying helped a broad dollar recovery, with the pair breaking out on the upper end of the range, to set a session high at Y90.67. Traders say exporter offers from Y90.80 to Y91.00 are capping gains from here.
Euro-yen like dollar-yen dipped initially to Y124.10 level however decent demand in dollar-yen helped the cross higher, Asian accounts were noted buyers looking for a test of Y125.00 where there were reported stops. These got taken out early in the European session and in turn helped to trigger option barriers in euro-dollar at $1.3800. Decent resistance lies in wait for euro-yen around the Y125.25-35 area with more stops placed on a break of Y125.50-60.
RES 5: Y92.15 High 19 Feb
RES 4: Y91.75 200-day moving average
RES 3: Y91.22/24 Minor resistance line 7 Jan, 76.4% retracement
RES 2: Y91.09 High 12 Mar
RES 1: Y90.85 Minor resistance line 19 Feb
CURRENT LEVEL: Y90.55
SUP 1: Y90.15 21 & 100-DMA, Kijun line
SUP 2: Y89.80 Base of the Ichimoku cloud
SUP 3: Y89.60/65 Tenkan line of the Ichimoku cloud, Low 9 March
SUP 4: Y88.13/24 Low 4 March, 61.8% retracement of Oct/Dec rally
Cable
Opened Asia at $1.5240, off Tuesday’s late rally that saw rate push up to $1.5260. Early trade was restricted between $1.5218/45, pre BOJ announcement, the rate then dropping to mark session lows at $1.5210 before bouncing back, the recovery extending into early European trade to take it through the mentioned NY high and on to $1.5270. Buoyant tone remains, though traders will have focus turned to this morning’s release of UK employment data and BOE Minutes at 0930GMT.
Resistance now seen at that failed high of $1.5270, a break to open a move toward $1.5300, with tech traders noting that the $1.5299 level corresponds to a 50% retrace of the last fall from $1.5816 (Feb17) to $1.4781 (Mar1). Above the figure and rate can push on toward $1.5325/30 ahead of $1.5345/55. Picking up weak talk suggesting LHS interest to be seen at one of today’s fixings (possibly 0800GMT), but info is around the market and making some suspicious. Support seen at $1.5225 ahead of $1.5210/00.
RES 4: $1.5540 Current top of the daily Bollinger band
RES 3: $1.5420/22 61.8% of Feb/Mar decline, 38.2% of 2010 decline
RES 2: $1.5350 Breakout level
RES 1: $1.5299 50% retracement of post-17 Feb decline
CURRENT LEVEL: $1.5222
SUP 1: $1.5210 21-day moving average
SUP 2: $1.5150 5-day moving average
SUP 3: $1.4866/73 Low 2, 10 March
SUP 4: $1.4835 Current base of the daily Bollinger band
US Stocks
A late session rally allowed stocks to end with modest gains after the Federal Reserve reiterated its low rates ‘for an extended period” policy. Dow added 43.83 points (+0.41%) by day’s end, finishing just below its session high to close at 10,685.98 while Nasdaq added almost 15.80 points (+0.67%) to end at 2378.01. S&P 500 closed up 8.95 points (+0.78%) at 1159.46.
* Globex traded US stock index futures are trading higher into early European dealing Wednesday. The S&P June contract was last ahead by 2.10 points at 1156.90, with the Nasdaq June contract higher by 3.50 points at 1932.00. The Dow June contract was also higher, up 19 points at 10643.
Daily Calendar
At 0815GMT, ECB Governing Council member Mario Draghi is due to speak at a European Parliament Committee on Economic and Monetary Affairs, in Brussels, while at 0900GMT, ECB Governing Council member Axel Weber appears on a panel discussion on “The Aftermath of the Crisis. A Newly Structured World?”, in Cologne.
There is a busy UK data calendar at 0930GMT, when labour market data is due at the same time as the Bank of England releases the minutes of the MPC meeting, which took place in March.
Last month’s UK claimant count unemployment confounded expectations to post its largest rise since July 2009, more than wiping out the declines seen in the previous two months. Up until January, claimant count unemployment had generally been rising at a slower pace over the prior nine months with the count actually improving in November and December following twenty months of rises. This improvement may have been partly due to the extra rise in temporary jobs ahead of Christmas and the increase in people reluctantly taking part-time work. The claimant count may yet then post some modest monthly increases in the first half of 2010, particularly given that GDP growth continued to contract in Q3 and remained weak in Q4. Indeed, February saw the announcement of thousands more job losses and the median forecast is for a rise of 5,000.
However, there is a wide range of forecasts, between -15k and +30k and heavy snow may have distorted the picture in January with some companies likely to have delayed their hiring process until February. Average earnings are seen at 2.1% 3m y/y, 1.4% ex-bonus .
The March Bank of England decision marked the first anniversary since QE was launched. However, there were no surprises as the Bank of England maintained a pause in the quantitative easing programme at Stg200 billion and kept interest rates on hold at 0.50%. With major decisions on QE essentially being made on a quarterly basis, the minutes look set to reveal another unanimous vote given there were no dissents at the key February meeting.
At 1000GMT, EMU data sees Q4 labour costs data, which is seen coming in at 2.5% y/y, released along with January construction production.
US data starts at 1100GMT with the weekly MBA Mortgage Application Index.
At 1230GMT, the US Producer Price Index is expected to fall 0.2% in February on a reversal in energy prices after the January spike.
Gasoline pump prices and ETI oil prices were both lower in the month. Core PPI growth is expected to slow to 0.1%.
US data continues at 1430GMT with the weekly EIA Crude Oil Stocks data. Later on, at 2030GMT, Dallas Fed President Richard Fisher is due on a panel about crisis response at a Dallas Fed conference on the euro and dollar in the crisis.