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07:12 USD/JPY: On The Rebound From A 100.02 Low, Good Bids Pre-100.00 Tokyo, March 13. USD/JPY looks to be on the rebound after a number of attempts to break below 100.00. USD/JPY traded through a major multi-year support level at 101.30- 40 and presumed option barriers at 101.00, 100.75, 100.50 and 100.25, tripping stops below each level. Why not below 100.00? The answer may be that many players, and heavy-hitters at that, would not like to see it back below 100.00. Japanese authorities are included with FinMin Nukaga and ViceMin Shinohara on the wires earlier on the first test down towards 100.00 warning of excessive FX volatility and moves. With USD/JPY down close to 8-yen over the past two weeks, this is no surprise. A break below 100.00 could also result in pandemonium amongst Japanese exporters, many of whom are in possession of 105+ USD puts with knock-outs at this level. Those at MoF managing Japan"s $1 trln+ foreign reserves, mostly in USD, are probably not that amused either. It may take a much larger push to break below 100.00 but, given overall USD weakness, further attempts may be seen tonight. There is really no major supports in USD/JPY till the 79.75 record low seen back in April "95. USD/JPY currently trades 100.38/41, up on the back of some Asian spec short-covering and the bids ahead of 100.00.
Dollar Falls to 12-Year Low Against Yen on Hedge Fund Failures
By Stanley White and Kosuke Goto
Enlarge Image/Details
March 13 (Bloomberg) -- The dollar fell to the weakest since 1995 against the yen and a record low versus the euro after a Carlyle Group hedge fund failed to reorganize debt.
The currency also slid to an all-time low against the Swiss franc after Carlyle's mortgage-bond fund said lenders will seize its assets. Government reports today will probably show U.S. retail sales growth slowed and unemployment claims rose. Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. last week joined a growing list of banks predicting a recession.
``Investors are getting out of dollar assets and this is going to lead to a dollar crash,'' said Tetsuhisa Hayashi, chief currency manager of foreign-exchange trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender. ``Retail sales cannot be good.''
The U.S. currency fell to 100.29 yen at 2:37 p.m. in Tokyo after reaching 100.03, the lowest since Nov. 10, 1995, from 101.79 in New York late yesterday. The dollar declined as low as $1.5586 per euro, the weakest level since the European currency's 1999 debut. The euro dropped to 156.10 yen from 158.30.
The dollar bought 1.0106 Swiss francs, after reaching a record low of 1.0091. The British pound rose to $2.0298 from $2.0270. The Australian dollar advanced to 93.56 U.S. cents from 93.33 cents after data showed companies in the Southern Hemisphere country hired extra workers for a record 16th month.
The Singapore dollar rose to a record of S$1.3795 per dollar. The yuan gained to 7.0950 against the dollar, strengthening beyond 7.1 for the first time since the fixed exchange rate ended in 2005.
Carlyle Talks
The yen climbed as much as 1.8 percent against the dollar as Amsterdam-listed Carlyle Capital Corp. said talks with lenders had failed and it has defaulted on about $16.6 billion of debt through March 12. Drake Management LLC, the New York based-firm, said yesterday it may shut a $3 billion hedge fund, while Amsterdam-based GO Capital Asset Management BV blocked clients from withdrawing cash from one of its funds.
The Central Bank of Jordan is reducing the amount of dollars in its foreign reserves because of the declining value of the U.S. currency and the need to service debt, Deputy Governor Faris Sharaf said yesterday in an interview in Amman, Jordan. The Jordanian dinar has been pegged to the dollar since October 1995.
A Qatar central bank official denied an Emirates Business 24/7 report that policy makers from six Gulf Cooperation Council nations will consider currency revaluation when they meet next week. The dollar's 10 percent drop against the euro last year has stoked inflation in the region.
China's Reserves
China wants to invest more of its reserves abroad, Minister of Commerce Chen Deming said yesterday. China's reserves are the world's largest at $1.5 trillion.
``We're probably going to remain in the situation where long-term money moves away from the dollar,'' said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. `There is a lot of discussion in the market about China. There's also a lot of discussion about the Middle East.''
The U.S. currency may weaken below 100 yen, he said.
U.S. retail sales rose 0.2 percent in February after a 0.3 percent gain in the previous month, according to a Bloomberg survey before the Commerce Department data today. A separate report from the Labor Department is forecast to show the number of Americans filing first-time claims for jobless benefits rose to 357,000 last week from 351,000.
The Dollar Index traded on ICE Futures in New York, which compares the currency to those of six trading partners, declined to a record low of 71.99.
`Real Trouble'
Since hitting a 4 1/2-low on June 22, the yen has rallied 24 percent against the dollar. Jamie Dimon, chief executive officer of JPMorgan, said at a dinner in Washington yesterday the U.S. economy is now in a recession and financial institutions are about half-way finished with solving their problems.
``The dollar looks in real trouble and there is no obvious resistance level against the euro,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``I don't think you can pick a level for where it will stop.''
U.S. President George W. Bush said yesterday in an interview with the U.S. Public Broadcasting Service that the dollar is ``adjusting'' and its decline isn't ``good tidings'' for the strong dollar policy that he favors.
``Bush's comments were about as lukewarm as you can get,'' said Brian Dolan, research director at Forex.com, a unit of currency trading firm Gain Capital in Bedminster, New Jersey. ``Some may have interpreted his `adjusting' comment as tacit acceptance that we're in a broad-based dollar devaluation.''
The dollar also fell as firms from Citigroup Inc. to Goldman Sachs Group Inc. said yesterday the Federal Reserve's plan to inject $200 billion into the banking system may fail to break the freeze in money-market lending.
U.S. Rates
Traders bet the Fed will cut its rate as much as 0.75 percentage point on March 18 to avert a recession. The likelihood of a reduction to 2.25 percent was 76 percent, according to futures on the Chicago Board of Trade. The balance of bets is on a cut to 2.5 percent.
The Fed's measures are ``not a panacea, more like an aspirin for the dollar,'' analysts led by Daniel Tenengauzer, New York-based head of global currency strategy at Merrill Lynch & Co., wrote in a research note. The dollar may decline to $1.57 per euro this month, Merrill forecast on March 6.
Japanese authorities sold the currency on all four occasions since 1995 when the yen approached the 100 mark in a bid to support exporters including Toyota Motor Corp., the world's second-biggest automaker.
``We must continue cost cuts by all means, but the currency has reached the level where we have to think about other measures,'' Toyota President Katsuaki Watanabe told reporters in Tokyo today. A 1 yen gain in the Japanese currency against the dollar cuts Toyota's annual operating profit by 35 billion yen ($349 million), according to the automaker
Australia February Employment Up 36,700 []
3/12/2008 8:54:06 PM The employment picture in Australia improved more than expected last month.
The Australian Bureau of Statistics reported Thursday that the number of employed Australians in February increased by a seasonally adjusted 36,700 over the January figure, to a level of 10,665,500.
Full-time employment increased 47,700 and part-time employment decreased by 11,000.
In the meantime, the number of unemployed Australians decreased by 16,800 to a total of 440,900. The number of people seeking full-time employment dropped by 5,800 and the number seeking part-time work fel by 11,000.
Most analysts had forecast the number of employed to increase 15,000, with an unemployment rate of 4.2%.
The bureau also reported that the workforce participation rate, which measures the proportion of the work age population actively seeking employment, held steady at 65.2 percent.
European Indices Set For Higher Open After Fed Reveals Liquidity Plans - European Commentary []
3/12/2008 3:48:06 AM The major equity indices in Europe are set to open higher after major rallies bouyed share prices in Asia and the U.S.
The gains have come largely on the back of the Federal Reserve's plan to make over $200 billion in additional capital available to U.S. banks. The latest cash infusion will also allow banks to put mortgage debt up as collateral to support the loans. The news sent the Dow Jones Industrial Average up by 3.5% on Tuesday and Japan's Nikkei Average up by 1.6% in overnight trading.
The British pound has risen against its major counterparts in early Wednesday trading and is currently trading at more than $2.01 against the U.S. dollar.
Oil has retreated from a record high taken out on Tuesday but remains near $109 per barrel of light sweet crude. Prices had climbed to near $110 per barrel on Tuesday, and the Fed's plans to increase liquidity in U.S. capital markets has traders expecting increased demand, keeping prices relatively high.
In economic news, Britain's Chancellor of the Exchequer, Alistair Darling, will release his first proposed budget later on Wednesday. It is expected to include a number of new taxes and duties, but little in the way of tax cuts, and foresees slower economic growth than the government had previously predicted.
In corporate news, Britain's Standard Life reported its earnings for 2007 on Wednesday. The firm reported a profit of £465 million for the year, up from £283 million last year.
Advertising firm JCDecaux reported a profit of EUR 221 million for 2007, up from EUR 201 million last year. The company also said that it expects sales to grow by about 6% in the current year.
Shipping firm Bourbon revealed earnings of EUR 391 million for 2007 on Wednesday. This compares to EUR 153 million in 2006. The results include a gain of EUR 229 million from a sale of assets.
00:36 AUS ECON: Feb Jobs Surge 36.7k, Unemployment Down To 4.0% Sydney, March 13. Australia's labour market strengthened in February with employment rising 36,700, driven by a massive 47,700 increase in full-time employment after several slack months. The result was well above the consensus for a 15,000 increase and IFR's 12,500 forecast, and pushed unemployment to a fresh thirty- plus year low of 4.0%, although participation was unchanged at 65.2%. The market had expected unemployment to remain steady at 4.2% while IFR had expected a drop to 4.0%. The result for participation was as expected by the market and IFR. The strength of the labour market, albeit a lagging indicator, suggests that the RBA's work to cool domestic demand is not yet finished. Most, including IFR, expect the central bank to pause in April before lifting the cash rate again in May following the March quarter CPI report in late April, but the solid jobs report raises the risk that it will deliver a third straight rate hike next month.
Kiwi Hits 12-day High Versus Greenback Amid Q4 Retail Sales Data [NZD/USD]
3/12/2008 6:24:44 PM New Zealand dollar rose to 12-day high versus the US dollar as the Statistic New Zealand released its report on the fourth quarter Retail trade at 5:45 pm ET Wednesday that moved up 1.9%. Core retail sales, excluding vehicle-related sales, increased 0.4%. As of 6:00 pm ET Wednesday, the New Zealand dollar hit a 12-day high of 0.8093, up from an early morning low of 0.7999. However, the pair lost some ground shortly and as of now the kiwi-buck pair is trading at 0.8068.
00:02 NEWS: MoF Wkly Flow Data - Japanese Still Buying Foreign Bonds Tokyo, March 13. Recent declines in USD/JPY and pull-backs in JPY crosses look to have whetted the appetites of Japanese investors, institutional and retail alike. Japanese were again big buyers of foreign bonds in the week-ended March 8. This follows very good buying in February, somewhat surprising as the end-January to mid-March period usually sees more Japanese repatriation ahead of fiscal year- ends which come at end-March in Japan. Some repatriation flows undoubtedly took place, especially from institutional investors. But there also seems to be flows going the other way as well from this bloc. Retail investors, for their part, have been buyers on almost a continuous basis as USD/JPY fell and JPY crosses pulled-back. The spate of uridashis continues, helping to sop up retail demand for higher yielding foreign bond funds. This is especially the case with JPY stronger. Latest data from MoF show Japanese bought a net Y741.6 bln in foreign bonds and a net Y63.9 bln in foreign stocks. On the other side of the ledger, foreign investors sold a net Y417.3 bln in Japanese stocks but bought a net Y411 bln in Japanese bonds.
00:03 Hedge Funds On The Brink Of Collapse - UK Times Sydney, March 13: The UK Times is reporting this morning that several hedge funds are on the brink of collapse or had halted withdrawals. The Times story states: "the potential closure of six funds came as a leading private equity executive, who declined to be named, said that such funds were "snapping like twigs", with one failing every day."
The article states that there is a growing consensus that the moves by the Fed on Tuesday to ease the deteriorating credit crisis will only help in the short-term and Patti Cook, Freddie Mac s chief business officer, predicted that the Federal Reserve"s 200 BLN bond lending facility this week would fail to solve the long-term problem of Wall Street s deepening credit crisis.
The safe haven trades were back in force during the US session after Drake management wrote to investors that they were considering closing their 3 BLN USD Global Opportunities Fund. According to the Times, Drake is also understood to be considering whether to close two other hedge funds, the Drake Low Volatility fund and the Drake Absolute Return, both of which lost almost a sixth of their value last year. It was also revealed during the US session that GO Capital Asset Management, an Amsterdam investment group, said that it had frozen its 881 MLN USD Global Opportunities hedge fund, preventing investors from withdrawing their capital. About half the fund"s investors have already asked to withdraw their investment.
Forex - Yen Surges Versus Majors [EUR/JPY]
3/12/2008 5:57:52 PM The Japanese yen surged against its major counterparts by about 5:40 pm ET Wednesday. As of now, the yen is worth 157.76 versus the euro, 100.01 versus the Swiss franc, 205.56 versus the pound and 101.36 versus the US dollar. Traders are now looking ahead of Japanese Industrial production and capacity utilization data slated for release at 11:30 pm ET Wednesday.
00:23 EUR/USD: Weighed Down By EUR/JPY Selling Sydney, March 11: The EUR/USD is under pressure in Asia due to heavy EUR/JPY selling flows that has taken the cross as low as 155.60 from 156.30 earlier. Key support for the EUR/USD is found at 1.5310/15 and stops are eyed below 1.5300. The EUR/USD trades 1.5337/42
3/10/2008 8:00 PM: EUR/$..1.5345 $/JPY..101.52 GBP/$..2.0083 $/CHF..1.0180 AUD/$..0.9174 $/CAD..0.9958
USD Plummets to 8-year Low vs JPY by Korman Tam
The dollar come under aggressive selling pressure against the yen, falling to its lowest level since 2000 at 101.38 as heightened risk aversion prompted a sharp rally by the Japanese currency. Persistent fears of instability in the US financial markets and burgeoning concerns about an economic recession have plagued the greenback. However, the currency’s rapid descent has prompted a renewed bout of verbal intervention in an effort to contain further deterioration.
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Euro Buoyed
With the euro maintaining its strength near record levels against the dollar, Eurozone officials have stepped up their rhetoric to temper additional appreciation. ECB President Trichet said he was concerned by excessive moves in foreign exchange, adding that excessive volatility and disorderly fx moves are undesirable. He also said that he notes with “extreme attention US statement that strong dollar policy is in US interest”. Nonetheless, given the barrage of criticism over China’s currency regime and accusations of currency manipulation, Trichet’s comments are viewed as little more than jawboning rather than a signal of coordinated intervention.
The Eurozone calendar was light at the start of the week, with the release of Germany’s January trade surplus, largely in line with consensus estimates at 16.1 billion euros, up from 15.6 billion euros from December. In the coming session, traders will look ahead to Germany’s February wholesale price index and the March ZEW sentiment survey. The February WPI is see edging higher on an annualized basis to 6.8% from 6.6% while the monthly report is seen declining to 0.6% versus 1.4%. Meanwhile, Germany’s ZEW sentiment survey is expected to worsen to minus 40.0 from minus 39.5 while the current conditions survey is seen deteriorating to 30.4 versus 33.7.
Yen Powers to 8-year High
Heightened risk aversion and more declines in global equity bourses propelled the yen to its highest level versus the dollar since 2000 at 101.38. We expect the yen to continue edging higher with a near-term target of 100.
Economic data from Japan this week will see the minutes from the BoJ monetary policy meeting, Q4 GDP, and January industrial production. The Bank of Japan is largely expected to remain on hold this year with slight risk that the BoJ could possibly ease rates. Nonetheless, we favor the yen to continue to benefit from increased risk aversion and see the currency breaking through the 100-level over the coming months.
04:05 JPY: Data As Of Yesterday Show Foreign Ccy Longs Mostly Up Tokyo, March 4. Data from Quick Global Information show Japanese margin player net currency longs mostly up as of yesterday. It seems these players did not panic on the recent JPY surge which took USD/JPY down to multi-year lows. USD net longs were actually up to 82.7% from 81.6% as of February 25. EUR longs also rose to 73.6% from 70.9%, GBP to 79.8% from 75.7%, AUD to 81.9% from 78.1% and NZD to 75.5% from 70.9%. The thinking is that these players were perhaps more long non-USD currencies against JPY though these crosses too took large hits. These players may simply be waiting for the JPY crosses to bounce again as so often been the case recently. They do remain considerably long USD however, and further legs down in USD/JPY could see some cutting of these positions, especially on breaks below 102.00, 101.00 and 100.00, a major psychological level.
01:54 UK GOVTS: Weekend Press Round Up; More Bad News --Sydney, March 3:
More bad news from the financial sector has been gracing the pages of the UK
press over the weekend. Saturday"s Telegraph reported that UK banks will write
off a record GBP6.8bn in household debt from last year. The "Tele" also reminds
us that this news comes after the country"s largest building society,
Nationwide, released a report stating that house prices were suffering their
worst streak since 2000, after falling for a fourth consecutive month in
February.
The Sunday Telegraph has an interview with former MPC member Chris Goodhart
who is recommending that the BoE cut rates to 4% from their current level of
5.25%. Goodhart continued "my own personal guess is that America will get into a
technical recession - although I hope it will be quite mild - during the first
three quarters of 2008. My fear is that since the UK has been so strongly
involved in the housing market, and in the financial sector, both of which are
at the sharp end of the present financial crisis, that it is actually quite
likely that we will move into what I think would be a rather shallow recession."
Elsewhere, David Smith writes in the Sunday Times that the MPC will keep rates
on hold when it meets later this week, preferring to wait until May, citing the
shadow MPC"s (Institute of Economic Affairs) vote previously to also keep rates
on hold by a vote of 5-2.
The Sunday Observer reports that HSBC is expected to reveal that it is
writing off $11bn of its US mortgage and consumer lending, as part of a $17bn
write-off against bad debts across its global operations. And Lastly, the Sunday
Times reports that PM Brown will move to prevent second home ownership to stop
rural houses prices from soaring.
02:01 USD/JPY: Nukaga Comments Lame, Bias Firmly Down But Bids Below Tokyo, March 3. Dealers seen comments from Japan FinMin Nukaga to have been extremely lame with no warnings over recent JPY surges and that comments on FX levels were inappropriate. USD/JPY looks to remain under pressure as a result. That said, bidding interest below 103.00 looks to be heavy as witnessed on the break earlier below 103.00. A low of 102.90/95 was seen then and the pair immediately bounced. Standing bids are seen below, especially at 102.85, 102.65, 102.50, 102.25 and 102.00. Some light stops are seen mixed in below 102.90, just below the session low. Bidding interest is reported to have been strong all the way down with rumors of Japanese quasi-governmental entities tipped to be buying all the way down after stops below 103.70 were tripped. This demand could continue but may not be enough to limited further USD/JPY losses with the USD bias likely to remain down and many dealers now eyeing a possible test of 100 in USD/JPY. The pair currently trades 103.08/09 with dealers still extremely jittery.
05:57 EUR/JPY: Clawing Way Higher, Back Above 159.00 Tokyo, February 29. Short-covering by intra-day players looks to be responsible for the EUR/JPY move back above 159.00 this afternoon. The cross currently trades 159.12/14. From an early high of 160.12, the cross crashed to 158.66 on the back of long liquidation and risk aversion. Profit-taking on long EUR/USD positions helped push the cross down this morning. Sell side flows look to have abated with short-term players closing up shop for the weekend. The situation is still touch and go however with USD/JPY still precariously poised just above option barriers at 104.50 and the USD bias still down. Another push lower in USD/JPY could help the cross lower though a more steady EUR/USD should prove supportive. Technical support in the cross is eyed towards the early lows and then around 158.00 where a number of supports are clumped including the base of the Ichimoku cloud at 158.00, the kijun line at 157.74 and daily lows from the 22nd and 20th. Some resistance is seen at the top of the Ichimoku cloud at 159.42 and then at 159.57, the tenkan line. EUR/JPY crossed below both of these levels early today.
19:50 US GOVTS: Defense Dept Sends USS Cole to Lebanese Coastline Boston,
February 28. In a force projection measure following events in Syria, the
Defense Department has ordered the USS Cole to the coast of Lebanon. That
should keep a firm bid under oil, already up 3.3% on the session, last at
$102.90.
19:14 EUR/USD: CTAs Pare Back After Fresh Record High New York, February 28th. With EUR/USD soaring to 1.5229 at its peak, IMM players have pared back their longs, helping to pull spot back down to 1.5213, its post-peak low. Longs are roughly around E200-225mn, down from around E300mn earlier, on impressive volume of E865mn. Spot encountered decent bids on the dip, and has nudged up to the 1.5220 level, as traders head into month-end long and right, but not long enough.
05:00 GMT February 28th USD/JPY and JPY crosses look to be pulling in opposite directions with the former looking to continue to trade weak on broad USD weakness but the latter holding their own despite bouts of stock market and USD/JPY weakness. USD/JPY weakness does look to be working to help limit the upside in the JPY crosses but cross buoyancy helping to limit the USD/JPY fall. Which influence wins out remains to be seen. USD/JPY traded down to a low of 105.95 overnight and is holding just above in the low-106 area today. The range so far has been 106.20-51. Helping to support the downside are rumors of bids from quasi-official Japanese entities alongside US names, mostly taking profits on shorts. Stops are eyed below 105.90 however and further weakness could see presumed option barriers at 105.00 come into focus. EUR/JPY traded relatively buoyantly in Asia today, holding between 160.48-161.00 and eyeing EUR/USD moves for direction. The 161-handle looks to be shaping up as a profit-take level. This seems to be the case in AUD/JPY as well towards 100.50. It traded a 100.10- 48 range in Asia. NZD/JPY traded a 86.71-94 range.
05:23 GMT February 28th EUR/USD mix of stops and bids at 1.5080.(hi)
05:22 GMT February 28th AUD/USD bids moved up to the 0.9400-10 level.(hi)
04:41 GMT February 28th USD/JPY option barriers tipped at 105.00, bids ahead, stops below here and 104.90.(hi)
04:40 GMT February 28th USD/JPY bids eyed from low-106 area down to 105.95 London-New York low. Some tipped as from quasi-governmental Japanese names. IMM CTA and other US names also seen on buy-side. Stops below 105.90. Offers towards 106.60, light trader stops above 106.65, more above 107.00 but offers seen heavier on 107
05:30 NEWS: BoJ Mizuno - Need To Stand Pat On Rates For Now Tokyo, February 28. Over DowJones. The BoJ Policy Board member who is speaking in a regional center reiterates that a rate cut now would not have much positive impact on growth. He does see the need for "normalization" of interest rates over time but not now.
Inflation A Risk To Fed Balancing Act
The U.S. Federal Reserve is facing an increasingly difficult
balancing act of trying to help the economy and markets without
further stoking inflation, economists told lawmakers
Tuesday.
In testimony to the House Financial Services Committee,
several economists gave differing opinions on whether the
economy is headed for a recession, but agreed that rising inflation
is making the Fed’s job harder.
Alice Rivlin, a former Fed vice chairman who is now a senior
fellow at the Brookings Institute, said the Fed’s response
has been “appropriate and creative,” but also cited “ample reasons
to be concerned about bringing the short-term interest rate
down too far too fast.”
Rivlin said she agrees with the “consensus” view that the
economy will escape a recession, but added that “the uncertainty
is very great and you have to worry about the downside.”
John Taylor, a Stanford University economist who formerly
worked at the Treasury, agreed that the downside risks are real.
But he warned that excessive easing “could very well bring us
back to those bad old days of higher inflation and, listen to
this, frequent recessions.”
Using the Taylor Rule he designed to try to balance inflation
and growth risks when making monetary policy, Taylor
said the current environment suggests that interest rates should
actually be a little bit higher than they are now.
The Fed has slashed the benchmark fed funds rate by 225
basis points since September, to 3%, and further easing is
expected next month.
The other panelists gave starker views of the economy,
however, and said the Fed will be unable to keep it out of
recession alone.
“I think the economy is in the midst of a recession,” said
Moody’s Economy.com chief economist Mark Zandi.
Nouriel Roubini, economics professor at New York
University, agreed that the economy has already entered a
slump. He foresees a “severe recession” lasting a year or more.
Carmen Reinhart, a University of Maryland professor who
studies economic crises, said the U.S. is in the midst of a “classic”
one that requires more easing.
USD/JPY Daily Outlook
Daily Pivots: (S1) 106.93; (P) 107.54; (R1) 107.88; More.
USD/JPY's fall from 108.59 extends further to as low as 105.94 today. Break of 106.71 support indicates such decline has resumed. As discussed before, corrective rise from 104.96 has completed with three waves up to 108.59, just missing 100% projection of 104.96 to 107.89 from 105.68 at 108.61. Further decline is now expected to retest 104.96 low and break will confirm whole down trend from 124.13 has resumed. Meanwhile, above 106.79 minor resistance will turn intraday outlook consolidative first.
In the bigger picture, fall from 114.77 should still be in progress as long as 110.10 resistance holds. Though, with a short term low in place at 104.96, firm break of this support is needed to confirm the down trend resumed. Otherwise, some more consolidation could still be seen in short term. Also, whole medium term down trend from 124.13 remains in force towards key medium term support zone of 101.22/65 level. However, since the structure of the fall from 124.13 is not clearly impulsive yet, the fall from 124.13 might only be part of a wide range consolidation pattern only and 101.22/65 key support might hold. Much attention will be paid there on sign of reversal as USD/JPY approaches this key support zone.
On the upside, though, above 110.10 will indicate that fall from 114.77 has already completed. Stronger rally could the be seen retest the trend line resistance (now at 112.36). But still, a decisive break of trend line resistance is needed to be the first signal that whole down trend fro 124.13 has completed. Otherwise, medium term outlook will remain bearish.
Dollar Remains Weak after Dismal Data
Dollar weakens sharply across the board, making record low against Euro, Kiwi as well as gold and oil. The greenback remains generally weak in early US session following the release of weaker than expected durable goods orders and new homes sales. Headline durable goods orders dropped most in a year by -5.3% in Jan, even weaker than consensus of -4.0%. Ex transport orders also dropped by -1.6% versus expectation of -1.4%. The contraction suggests that business are already starting to scale back capital spending due to tighter credit conditions. On the other hand, new home sales dropped more than expected by -2.8% from 604k to 588k in Jan, lowest since Feb 95.
In the opening speech in semiannual testimony on the economy before the House Financial Services Committee, Bernanke affirmed the markets that Feb will "act in a timely manner" to "provide adequate insurance against downside risks" to the economy. Such risks include "the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further." Though, Bernanke said that there are "slightly greater upside risks to the projections of both overall and core inflation" due to "further increases in the prices of energy and other commodities in recent weeks". Nevertheless, markets generally take today's speech as an affirmation that further 50bps rate cut is to be seen from Fed on Mar 31.
While dollar weakens broadly, the Japanese yen is boosted across the board too, by risk aversion on weakness in European stock markets, which carries on to early US session. However, Euro was additionally supported by solid data from Eurozone, which saw German Gfk consumer statement unchanged at 4.5. Eurozone M3 month supply growth slowed from upwardly revised 11.6% yoy to 11.5% yoy but beat expectation of 11.3%. Sterling remains the weaker one among the majors as see in price actions in crosses. UK Q4 GDP was unchanged at 0.5% qoq, 2.9% yoy. However, exports dropped -0.5% while import dropped -1.2%. Aussie and Canadian dollar are supported by new record of $967.7 in gold prices and above $102 record oil prices.
16:08 GBP/USD: Broad Based Negative USD Sentiment Dominates Trade New York, February 26. The market has more or less been left consolidating the overnight gains in the first half of the US session with initial offers seen capping early on by 1.9750-60 following the release of the higher than expected US PPI data. Additional selling pressure has emerged into the London fix aided somewhat by the miserable consumer confidence data coming in at the lowest levels since 2003. The sharp gains seen overnight follow a broad based USD sell-off with the market seen increasing their risk appetite on the back of yesterday"s upbeat Ambac news.
Recent comments from BoE"s Rachel Lomax also somewhat explain the more bid tone in Cable of late with the governor conveying her fears over the upside risks to inflation and the likelihood that this will impede the central bank"s ability to spur growth. Lomax went on to explain that the committee needs to see the risk to higher inflation subside before cutting rates more comfortably. Cable currently trades 1.9725 with sell interest reported by 1.9750-70. Fresh bids are touted down by 1.9650.
14:22 US TECHS: S&P Outlook; Range Break Already Tired Looking Boston, February 26. SPH finally broke the prison pennant that we have been writing about for weeks and closed above 1370 for the first time since Feb 5. However the follow through thus far has been limited (1375 high) and breadth on Monday was not strong. There is some troubling news out in the overnight press concerning VIES, variable interest entities that allow financials to keep assets like subprime securities off their balance sheets. A bond research firm has suggested that VIES may portend another $88 bln in losses for financials that use them as they are another short-term funded asset class. According to Moody's Investors Service and the Federal Reserve, VIES had $784 billion in commercial paper outstanding as of last week. In French VIE means life - for the banks it may mean death.
SPH needs to close above the top of the pennant that has constrained prices for the past couple of weeks with that line now at 1365. Upside resistance is above at 1370, 1375 and the 50% Fibo 1383.15. Below support is at 1363, 1357 and 1350-1353. A move below the lower pennant boundary (1343) would be negative and a close below 1331-1327 would be fatal, projecting a run for the lows.
14:26 FOREX: Eurosystem Central Bank Gold Reserve Sales Continue San Francisco, February 26th. The ECB announced this morning that reserves have declined by EUR100 mln to EUR149 bln, having normalized last week after a EUR6.8 bln decline as recent USD liquidity swaps matured. Notably, ongoing Eurosystem gold sales continue with sales from one Eurosystem central bank of EUR47 mln in gold. ECB-linked central banks have been net sellers of gold now for 171 out of the last 177 weeks but that has not yet failed to stem gold price gains. The IMF is also now tipped to sell gold as well, and it is debatable whether this will affect the price either, despite yesterday"s gold decline on the news the US would support such sales. A fall in gold would be a negative for AUD, CAD and ZAR but gold prices are rising this morning after the strong rise in US inflation data.
China to Use Yuan, Interest Rates to Tame Inflation (Update1)
By Nipa Piboontanasawat and Li Yanping
Feb. 22 (Bloomberg) -- China's central bank said it will make the yuan more flexible and use interest rates to curb inflation that's projected to remain ``high'' in the first half of 2008.
The yuan's appreciation is helping to temper import prices while exporters have shown ``higher-than-expected'' tolerance to a stronger currency, the People's Bank of China said in a report today. It didn't give a forecast for inflation, which reached an 11-year high of 7.1 percent in January.
The yuan completed its biggest weekly gain this year and has risen 16 percent since the end of a fixed dollar link in 2005, as the government tries to prevent the world's fastest-growing major economy from overheating. China's economy grew 11.4 percent last year, the fastest pace in 13 years.
``The central bank needs to achieve a balance between growth and inflation,'' said Frank Gong, chief China economist at JPMorgan Chase & Co. in Hong Kong. ``The best way to curb inflation is to appreciate the currency faster and reduce import costs.''
The yuan closed at 7.1418 per dollar as of 5:30 p.m. in Shanghai, bringing its gain this year to 2.3 percent. The currency climbed 7 percent against the dollar in 2007, more than double the gain the previous year.
China will ``boost the exchange-rate's role in adjusting the balance of payments and in curbing inflation,'' the central bank said in the fourth-quarter monetary policy report. The bank ``needs to carefully use interest rate tools to control the expansion of demand and stabilize inflation expectations,'' it said.
Subprime Impact
China has raised interest rates six times in the past year and boosted the percentage of deposits banks must hold as reserves to a record 15 percent. The benchmark one-year lending rate is 7.47 percent.
Economic growth may slow ``moderately'' this year on ``domestic and global uncertainties,'' the central bank said in the report, posted on its Web site.
``As the subprime crisis causes persistent fluctuations to financial markets, aggravated by upward inflationary risks, central banks are in the dilemma of choosing between curbing inflation and maintaining necessary economic growth,'' it said. ``Monetary policy has become increasingly difficult.''
China's inflation accelerated in January as the worst snowstorms in decades disrupted food supplies. The annual inflation rate more than tripled in 2007 to 4.8 percent, exceeding the central bank's target of 3 percent.
Inflation may remain at a ``high-level'' for ``some time'', driven by more expensive global commodities, domestic supply shortages and energy price reforms, the central bank said. The bank is studying the introduction of a ``core-index'' for inflation that excludes seasonal and international price factors.
Export Jobs
China has resisted pressure from the U.S. and Europe for faster yuan gains on concern a stronger currency would make the nation's exports less competitive, causing job losses. China's trade surplus rose 23 percent from a year earlier to $19.5 billion in January, after surging to a record $262.2 billion in 2007.
``Most foreign trade-related companies have adjusted to volatilities in the renminbi and their production, operations and hiring have remained stable,'' the central bank said. The yuan is a denomination of China's currency, the renminbi.
Economists surveyed by Bloomberg News said last month that China may use currency gains to combat inflation instead of interest rates as the U.S. Federal Reserve cuts borrowing costs. A wider gap in rates between the two countries may attract more cash into China, boosting money supply and prices.
The central bank cautioned that international moves to limit the activities of sovereign wealth funds could hurt the global economy. China has set up a $200 billion fund to seek higher returns on part of its $1.5 trillion foreign-exchange reserves, the world's largest.
Central Bank Bets, Debt Defaults, Fiat's One-Man Show: Timshel
Commentary by Mark Gilbert
Enlarge Image/Details
Feb. 22 (Bloomberg) -- Betting on the monetary-policy intentions of the Federal Reserve and the European Central Bank is getting harder as the threat of faster inflation competes for attention with the prospect of slumping growth.
U.S. rates look certain to drop; predicting how low the Fed will go is much tougher. Policy makers in the euro area, meantime, seem reluctant to relax their vigilance against rising prices no matter how dire the economic outlook gets.
Futures traders yesterday trimmed the odds of a half-point Fed cut at its March 18 meeting to 82 percent from 92 percent the previous day. Bets were pared after the minutes of January's two- step reduction in borrowing costs said Fed officials would be willing to change course at a ``rapid'' pace once convinced their monetary medicine was working its magic on the economy.
Figures the day before showing consumer prices climbed by 0.4 percent in January, faster than economists expected, also helped dent convictions about how much scope the Fed has to bolster the economy -- and to help the banking system recapitalize -- by driving down short-term lending rates.
By late morning yesterday, however, a 2.5 percent Fed rate was once again deemed a near-certainty at 96 percent. The Federal Reserve Bank of Philadelphia's report showing manufacturing unexpectedly contracted the most since February 2001 rekindled concern that the U.S. is already in recession. Futures prices also suggest a 2 percent Fed rate by mid-year is a done deal.
Pay Settlements
In Europe, the 5.2 percent wage increase won this week for about 85,000 steelworkers in western Germany by IG Metall, the nation's biggest labor union, may stiffen the ECB's resolve to keep its key rate at the 4 percent level maintained since June 2007. The pay deal, which runs for 14 months, is the highest for the region in 15 years.
The European Commission yesterday cut its forecast for 2008 euro-area growth to 1.8 percent from the 2.2 percent anticipated in November. At the same time, though, it boosted its inflation forecast to 2.6 percent from 2.1 percent, which would put consumer-price increases at their fastest pace since the introduction of the common currency.
Economists expect growth to trump inflation concern. The median forecast is for a quarter-point ECB reduction in the second quarter to be repeated in the third, leaving the key rate at 3.5 percent for the rest of the year.
Among the dissenters expecting no change this year are Merrill Lynch & Co., Goldman Sachs Group Inc., ABN Amro Holding NV and Morgan Stanley.
Traders aren't giving up on hopes for a rate cut, though they have scaled back their ambitions. The December interest-rate futures contract currently trades at about 3.64 percent, up from as low as 3.31 percent at the beginning of last week though still below the current three-month money-market rate of 4.37 percent.
* * *
Credit spreads, which measure how risky investors perceive corporate debt to be, have surged to levels far higher than the likelihood of companies not repaying their debts would suggest.
The Markit Crossover Index, which aggregates prices on the credit-default swaps of 50 European companies with high-risk ratings, reached a record 615 basis points this week, while the main Markit iTraxx Europe index of 125 investment-grade companies climbed to 135 basis points from 91 basis points two weeks ago.
At those levels, investors are being paid enough to compensate for 20 defaults in the Crossover index and 13 in the main index, according to credit analysts at BNP Paribas SA. Those implied default rates of 10 percent and 2.3 percent, respectively, are far higher than the historical averages of 3.9 percent and 0.2 percent.
``The Crossover index is currently pricing in a scenario in line with the worse on record, whereas the main index compensates investors for default rates 5.5 times higher than the highest recorded in the past 50 years,'' the BNP analysts wrote in a research note published yesterday. If fortune does indeed favor the brave, it could be time to buy.
* * *
Investors should pray that Sergio Marchionne, the chief executive officer of Fiat SpA, hasn't grown tired of leading Italy's biggest manufacturer.
Fiat shares slumped in early trading on Feb. 15 after Italian newspaper MF reported that Marchionne was considering quitting to take the top job at UBS AG. ``No, I'm not going there,'' Marchionne told reporters in Milan later that day.
The stock closed 0.15 percent higher that day, bucking a 2 percent decline in the Euro Stoxx 600 Index.
Yesterday, Marchionne was named as non-executive vice chairman of UBS as Europe's biggest bank by assets refurbished its management after reporting a fourth-quarter loss of 12.5 billion Swiss francs ($11.4 billion). Marchionne said in a statement that his new role is ``absolutely compatible'' with his Fiat responsibilities.
Investors aren't so sure. By midday Italian time yesterday, Fiat shares were trading at 14.77 euros, down 1 percent from where they opened. The Euro Stoxx 600 Index, by contrast, was 1 percent higher.
Fiat shares have more than doubled since Marchionne took the helm in June 2004, after losing 80 percent of their value in the previous four years. They have slipped more than 20 percent in the past six months.
When Marchionne joined, Fiat had suffered 11 consecutive quarterly losses. He began his tenure calling his new charge a ``chronic underperformer.'' He sacked a bunch of managers, slashed costs, and oversaw the introduction of refurbished models including the Grande Punto compact and the iconic 500 small car.
In October, he delivered his 11th quarterly profit gain in a row. Of the 26 analysts who cover the company, 19 recommend investors should ``buy'' shares, four mark it as a ``hold'' while only three say ``sell.'' Should Marchionne relinquish the wheel, Fiat investors may want to find a different ride.
18:25 EUR/CHF: Sharp Stock Market Rebound Sparks Cross Rally New York, February 20th. Something spooked the stock market higher this afternoon, sending carry trades like long EUR/CHF higher in the process, but this cross has yet to clear the 1.6185 high from the 14th. There is talk that a leak of the FOMC minutes may have contributed to this afternoon"s unusual price action, but it appears we will have to wait and see about that.
The Feb 5 high at 1.6215 is seen as the gateway to higher prices, but this pair has been flighty at best for weeks and breakout trades will be kept on extremely tight leashes unless there is a clear-cut fundamental reason for them not to be. Fresh warnings by BAFIN carried via Reuters suggesting Germany"s fate remains linked to the US fate, financially speaking, is taming further EUR/CHF buying for now, even as the DJIA gives back more of its afternoon gains
17:52 EUR/USD: German BAFIN Says German Financial System Vulnerable New York, February 20th. Just as the feeding frenzy was hitting its peak, the German regulator BAFIN, the Bundesbank and German Financial Supervisory Authority made a headline statement that came over Reuters News that the German financial sector is especially vulnerable to external shocks. EUR/USD has ebbed back to 1.4685 from its 1.4699 peak.
17:37 USD/JPY: Stocks Pop Topside Stops; EUR/JPY Bid To Old Boots New York, February 20th. A sudden surge in US equities which flipped from down 0.6% to up 0.2% has driven EUR/JPY up through stops at 158.80 and range extension has carried it through to 159.18 highs. Overbought Bollinger bands at 159.25/55 are deterring the next leg up, and there is some reticence to follow equities blindly as they can easily cede what they have already gained in a blink of an eye. Traders are looking for clues, no particular names in the frame. Corporate offers at 158.95 and 159.10 were absorbed easily.
USD/JPY stops were run at 108.30 but follow through has been more subdued with heavy mega-city bank, and exporter offers retarding topside progress. Thick offers between 108.45-55 have been reported with stops above at 108.60. Spot has slipped back to 108.25, with EUR/JPY last at 159.00 as US equities slip back to plus 0.16%, off their 0.25% high.
03:57 NEWS: More News On Subprime, Lehman Write-Off, New Fed Facility Tokyo, February 19. in the Wall Street Journal and Financial Times. The Wall Street Journal reports that Lehman Brothers, who has managed to avert the worst of the subprime fiasco until now, may have to write-off some $1.3 bln in commercial real estate loans. Lehman already wrote off some $830 mln in bad loans in Q4. Though not on the scale of Citibank or Merrill Lynch, the news is not bad. Separately, the FT reports that US banks have borrowed $50 bln recently via the Fed"s new term auction facility. It seems this facility will continue to be tapped by US banks following its introduction two months ago.
Australian Dollar Outlook
03:37 GMT February 19 The AUD/USD opened in Sydney around 0.9139 and has
traded a 0.9139/99 range so far. The pair was bid from the open today after
holding up extremely well in the face of a surging US dollar overnight against
the majors. The first topside resistance at 0.9150 was taken out on the back of
a hawkish speech by RBA Deputy Governor Edey and it kept climbing on the back of
local fund interest and buying interest from exporters and US investment banks.
It was sitting around 0.9170 on the release of the minutes from the RBA"s
February minutes and when the news headline of a discussion of a 50bps rate hike
at that meeting hit the screens, the pair shot up to 0.9199 before easing back
just below 0.9190. There was little follow through after the move and the
AUD/USD sat listless for the remainder of the day but poised for another strike
higher once the option barrier at 0.9200 is removed. Most players suggest that
the February minutes all but seal a March rate hike.
Chatter around dealing rooms today was that y"days spike higher was caused
by one large fund throwing in the towel and buying back his short position.
Orders Board
02:25 GMT February 19th USD/JPY bids towards 108.00, trail lower, light stops below 107.90 and 107.70 mixed in. Better bids from 107.50. Offers from 108.30-40 still, trail higher. Stops above 108.65 but more offers around 108.80 and ahead of 109.00 option barriers. Stops above.(hi)
02:23 GMT February 19th EUR/JPY bids towards 158.00, stops below. Offers ahead of 159.00, stops above. (hi)
02:21 GMT February 19th EUR/USD bids ahead of 1.4600, offers grouped around 1.4680. (hi)
02:21 GMT February 19thProp accounts seen selling GBP against AUD and NZD, the best performing currencies recently. (hi)
02:19 GMT February 19th AUD/USD sees good demand from the Sydney open from US investment banks, funds (one seen closing out a long-term short overnight), and local exporters. Small option barrier at 0.9150 taken out early. Offers ahead of 0.9200 thought to be defending option barriers. Stops above. (hi)
02:17 GMT February 19thNearby option expirations today include vanilla USD/JPY 107.00, 109.00, EUR/USD 1.4540 and AUD/USD 0.8960 and 0.9200 strikes. (hi)
14:00 GMT February 18th GBP/USD Some sell stops are touted below 1.9475 (today"s London morning six-day low), with demand then expected to emerge around 1.9450 (1.9444 was last Tuesday"s post-UK CPI data floor). Further buy interest is likely pre-1.9400 (lows just shy of 1.9400 were plumbed on Feb 8 & Feb 11).
02:01 NEWS: AMBAC"s Deadline Looms - Today --Sydney Feb 19th. Last Thursday, New York Governor Eliot Spitzer, told Congress that bond insurers had up to five days to resolve their financial problems, or else face government intervention which many assume would mean splitting the insurer up. That time limit expires today. The WSJ is running a story that AMBAC is trying to buy more time by raising $2bn in an equity raising to existing investors. The issues for Ambac in being split are complicated and not at all popular with those banks and hedge funds, who have wagered billions on the demise of the bond insurers, most prevalently via the use of CDS instruments, the cost of which has risen sharply in recent time due to the deterioration of Ambac"s balance sheet. Any attempt at splitting off the best parts of Ambac"s business such as its muni bond business unit, would likely see these profits erode sharply. With so much at stake, many suggest that a rapid resolution of Ambac"s problems and the fate of its triple A rating will take some time to resolve.
03:03 EUR/USD: Very Quiet In Asia, No Data Out Of EZ Today Sydney, February 19: The EUR/USD is idling around 1.4660 in very quiet trading conditions with all of the action today in the AUD, NZD and GBP. There is talk of good buying interest around 1.4610 while sellers are lined up ahead of 1.4680.
There isn"t and significant data out of the Euro-zone later today while the US comes cack from the three-day weekend and are likely to be greeted with more bad housing news when the NAHB is released and IFR is looking for the index to remain at a weak 19. The key data event out of the US this week will be Wednesday"s CPI. The EUR/USD trades 1.4658/63
03:49 AUD/JPY: Well Within Ichimoku Cloud, Break Up Sooner Or Later Tokyo, February 18. AUD/JPY is currently trading towards the middle of its 97.02-100.43 Ichimoku cloud, and is likely to break out to the upside perhaps sooner rather than later. A break above is almost a foregone conclusion at this time with the cloud descending precipitously next week. Next Tuesday, the cloud will have moved down to between 94.70-97.61 and below current levels. This being the case, attention will turn to the gradually descending 100 and 200-day moving averages. They are at 99.00 and 99.84 today, and will provide resistance going forward. breaks above should seen stops tripped. As jitters over the credit markets continue to recede, higher-yielding AUD and NZD look to remain the currencies of choice for not only Japanese but other investors. AUD/JPY is currently indicated at 98.55/65. Support below is seen at 97.65, lows seen early this morning, and then at 97.00-10, 97.02 the base of the Ichimoku cloud today. The top of the cloud is at 100.43 today.
02:27 GBP/USD: Edging Higher As Northern Rock Factor Wanes For Now Sydney, February 18: The GBP/USD is edging back towards 1.9600 and Friday"s 1.9610 close, as the negative effect of the news that Northern Rock has been nationalized has faded slightly. Analysts point out that many in the market thought that moves taken by the government were inevitable anyway and have been greatly priced into the GBP since the UK home lender got in trouble last year. They also point out that Germany has also used public money in to support ailing banks without too much damage being done to the Euro as a result.
There might be another round of GBP selling once London returns as headlines about reputation damage done to the UK financial services sector could affect sentiment. The GBP/USD trades 1.9594/99
Orders Board
04:11 GMT February 18thSome EUR/USD 1.4200 option barriers expire today. (hi)
04:10 GMT February 18th USD/JPY offers above 108.00, concentrated around 108.30, ahead of 108.60. Some stops in the 108.60-70 area but more offers around 108.80, ahead of presumed option barriers at 109.00. Larger stops above 109.00. Bids trail lower from 107.80 and especially below 107.50. Some stops below 107.00. (hi)
04:09 GMT February 18th EUR/USD offers from 1.4700. Downside stops below 1.4630. (hi)
04:08 GMT February 18th AUD/USD bidding interest stiff towards early 0.9054 Asia low. Bids now up to 0.9080. Offers ahead of 0.9100 option barriers absorbed, stops above tripped to 0.9127. Standing offers at 0.9180. (hi)
04:05 GMT February 18th NZD/USD bidding interest stiff towards early 0.7889 Asia low. Japanese names good buyers. Stops in the 0.7920-30 area taken out later. Standing offers from 0.7945. (hi)
04:03 GMT February 18thNearby option expirations today include vanilla EUR/USD 1.4620, 1.4790, EUR/GBP 0.7300 and AUD/NZD 1.1455 strikes. (hi)
18:42 GMT February 15 USD/CAD Offers heard by 1.0110-20. Heavy buy stops seen above 1.0130 along with fresh buy orders.
18:40 GMT February 15 EUR/GBP Stops touted above 0.7500. Offers seen capping just under by 0.7485-95.
16:27 EUR/USD: CTAs Decent Buyers, Trichet Comments Dampen Sentiment New York, February 15th. On volumes of around E385mn, the IMM have booked new longs in the E160-200mn region this morning, a big vote of confidence in the single currency, the biggest buying binges occurring after the industrial production numbers, and the U Mich sentiment, so the market is definitely data driven today.
Profits were booked during Trichet's umpteenth day of protracted opinions on the European economy, as traders picked out of the drone "financial market turbulence and volatility" negatively impacting European growth rates; and references to Europe's need to improve productivity, and improve labour market rigidity. The less than upbeat message added onto the poor US stats on the day just dampened spirits and prompted profit taking.
European corporate offers once again capped the top, and spot slid from 1.4709, the top of the 1.4692/1.4712 upper Bollinger band zone, and consequently heavily overbought; to 1.4685, and is jogging along in a 1.4680/95 sideways chop. Negative divergence on hourly RSIs has techies a little worried.
16:12 US TECHS: Dollar Follows the Script Written by Daily Triangle Boston,
February 15. The dip today meets the requirements of the triangle that continues
to restrict action on daily charts. The pattern calls for a move to the
Fibonacci 76% retracement of the preceding rally at 75.37 with initial support
at the 62% retracement at 75.69. Today's break below 50% at 75.95 is a strong
confirmation that these targets can be tested in the coming week.
The 75.37 zone is also where the first standard deviation from the
regression line, since late October, sits. The overlapping structure of action
during the last few months has created a horizontal regression line, indicative
of a market unable to continue to lower prices without new information.
Even though the triangle leans bearishly--it is a continuation pattern of
the preceding 2007 decline--a breakout is not anticipated for another couple
weeks while the apex of the pattern is completed. The end of the pattern will
likely be between the aforementioned regression line at 76.20 and the upper
trendline that currently lies at 76.90 in about two weeks.
02:21 NZD/USD: Trades Heavy In Asia, After The Retail Sales Data Sydney February 15. The Kiwi trades towards the base of a 0.7846/0.7906 range in Wellington, weighed down by the soft retail sales this morning. The data showed a rise of just 0.3% q/q, against median forecasts of a 0.6% gain. This joins the soft PMI data yesterday and the weakening housing sector, which all suggest that last year"s rate rises are biting, which is good news for the RBNZ. The immediate response to the data was muted, but selling came in later in the morning from the large multi-national banks, believed to be fund based, which is likely to continue offshore. Dealers report moderate volume, with no liquidity issues and expect further range trading, with a negative bias into the European open. Initial support comes in at Wednesday"s 0.7815 low and resistance at this morning"s 0.7900/10 high. The Kiwi has struggled above 0.7900 in he last few months and unless there is a major USD sell off, or surge in the equity markets, the Nikkei is currently down 1.49%, the downside looks the weak one. The Kiwi trades 0.7850/55.
00:41 USD/CHF: Small Bounce After Stops Below 1.0965 Triggered Sydney, February 15: Small stops have been triggered below 1.0965 in early Asia and there are more below 1.0950 and larger ones below 1.0925. The USD/CHF came down precipitously yesterday during the European and Asian sessions despite poor Swiss ZEW and news that UBS held more than 10 BLN USD in risky debt. Traders say that the USD/CHF move lower was due to a large EUR/CHF selling flow from a Swiss bank that caught the market very long in the EUR/CHF and USD/CHF. The USD/CHF trades 1.0970/75.
01:48 AUD/USD: Bouncing After Bids Ahead Of 0.9000 Hold For Now Sydney, February 15: The AUD/USD has managed to hold the 0.9000 level after getting sold down investment banks in early trading. Standing bids ahead of 0.9000 from an assortment of names, including option related, have absorbed the selling and helped the pairing bounce back to 0.9020. Hourly resistance is found at 0.9040. Asian stock markets have recovered some of the ground lost earlier in the session and this is relieving some of the downward pressure on the AUD. The AUD/USD trades 0.9017/22.
00:06 EUR/USD: Well Bid Again, Talk Of Stops Above 1.4650 Barrier Sydney, February 15: The EUR/USD is back at 1.4640 and traders say that stops building above 1.4650 are drawing the price action. There is talk of an option barrier at 1.4650 being defended and there is minor resistance at 1.4670 (Feb 6 daily high). A break above 1.4670 targets the 61.8 fibo of the 1.4953/1.4440 move at 1.4755. The EUR/USD trades 1.4643/48
CURRENCY TRADING SUMMARY – 15 FEBRUARY 2008 (00:30GMT)
· U.S. Dollar Trading (USD) eased against a number of majors as Fed Chairman Bernanke signaled the Central Bank may continue to cut rates further, amidst concerns the US was headed into recession. His comments addressed the Fed “will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks”, causing futures market to price in an 80% chance that policy makers will move to cut by another 50bps in the next rate meeting on the 18 march. In U.S. share markets the NASDAQ was lower on Thursday by 41.39 points (-1.74%) whilst the Dow Jones also fell by -175.26 (-1.40%). Crude oil fell by rose by US$2.15 a barrel to US$95.42. Looking ahead, heavy data day is scheduled for Friday, with the releases of TIC flows, NY Fed Manufacturing, Industrial Production, and Michigan sentiment survey.
· The Euro (EUR) rallied to a week high post “dovish” Bernanke comments yesterday. On the data front, Eurozone GDP came in better than forecasted in at 0.4%/2.3% for the fourth quarter (Forecast: 0.3%/2.2%). Overall the EURUSD traded with a low of 1.4550 and a high of 1.4649 before closing the day at 1.4634 in the New York session. EU Trade Balance on is scheduled for release on Friday.
· The Japanese Yen (JPY) erased a loss versus the dollar as Bernanke warned that tighter credit will be a “restraint on economic growth”, sparking declines in U.S. stocks. Overall the USDJPY traded with a low of 107.77 and a high of 108.61 before closing the day at 107.97 in the New York session. Looking ahead, the BoJ is scheduled to make a rate announcement, although widely expected that rates will be held at 0.50%.
· The Sterling (GBP) pound gained against 11 of the 16 most-traded currencies as traders reduced bets on interest-rate cuts by the Bank of England this year after Governor Mervyn King said on Wednesday, that price growth will overshoot the bank's 2 percent goal in two years. Overall the GBPUSD traded with a low of 1.9616 and a high of 1.9738 before closing the day at 1.9688 in the New York session.
· The Australian Dollar (AUD) was boosted by all time lows in Unemployment Rate coming in at 4.1%, below forecasted figures of 4.3%. The buoyant data confirmed that the labour force had grown by 26.8K jobs, adding to growing expectations that the RBA may move to increase rates in their March meeting.
· Gold (XAU) traded steady around $910 levels amid rising oil prices. XAU traded with a low of 902.15 and a high of 913.80.
23:27 EUR/JPY: Corrects Due To Weak Wall Street, But Trending Higher Sydney, February 15: The EUR/JPY fell from the 158.47 high seen early in the US session when Wall Street sold off aggressively in the wake of Bernanke"s testimony to Congress and news that Moody"s downgraded bond insurer FGIC. The EUR/JPY has eas3ed further in early Asia in anticipation of a bad hair day on Asian bourses and expectations that some carry trades bought yesterday when the Nikkei flew higher will pare back today.
Despite the correction lower, the EUR/JPY continued to trend higher yesterday and made a higher daily low and higher daily high for the third consecutive day. This makes yesterday"s low around 157.35 a key support level. More support is found at the kijun line just below at 157.15. A break below 157.15 targets the 38.2 fibo of the 153.95/158.47 move at 156.75. The EUR/JPY trades 157.77/82.
Euro Outlook
04:32 GMT February 14th The EUR/USD opened in Asia around 1.4575 after a quiet US session that saw the EUR/USD recover from a low of 1.4530 that printed in the wake of better than expected US Retail Sales due to heavy EUR/JPY buying sparked by the subsequent rally on Wall Street. The EUR/USD fell to 1.4550 in early Asia when stronger than expected Japan GDP pushed the EUR/JPY from 157.75 to 157.35. There was good buying of EUR/USD at the lows and the EUR/USD drifted back between 1.4560/75 for the balance of the very quiet session.
Sentiment towards the EUR/USD is mixed with some analysts looking for the EUR/USD to track lower due to expectations of slower EZ growth and a relatively unresponsive ECB. Others feel that the likelihood of more aggressive Fed easing and a steady ECB will continue to underpin the EUR/USD. We will get a read on all of the above later today when GDP data is released in Europe followed by Bernanke"s testimony. A break below 1.4530 would end a four-day sequence of higher daily lows after the sequence of higher daily highs ended yesterday. This would suggest that the EUR/USD is ready to track lower once again.
Yen Outlook
04:20 GMT February 14th USD/JPY and JPY crosses surged overnight, some to levels not seen for a month. Technically, many of these pairs look to have broken out of their recent range and many players are now looking for moves higher. Stronger than expected US retail sales provided the catalyst but more stable stock markets must be cited as well as the profusion of JPY longs held by short-term IMM CTAs and specs. In the case of USD/JPY, the floor looks to be gradually moving higher with bidding interest now up to around 108.00 and trailing lower. Granted, trader stops are noted below this level and 107.40 but bids look to be larger. Japanese exporters took advantage of the move back up to the 108-handle to sell but many of these players" offers have been filled. More lurk above but these players are not expected to be as aggressive as thought with USD/JPY now seen trending up. Option players look to defend option barriers at 108.50 and 109.00, and should provided added headwind. The range today was 108.01-32. EUR/JPY traded 157.34-85, GBP/JPY 211.94-212.69, AUD/JPY 96.90-97.63 and NZD/JPY 84.77-85.12. The Nikkei is up 3.5%.
Australian Dollar Outlook
04:10 GMT Feb 14 The AUD/USD opened in Asia at 0.8960 after getting hit as low
as 0.8923 during the US session when stops were triggered below 0.8960 in the
wake of stronger than expected US Retail Sales. The AUD/USD attained a bid tone
in early Asia amid scepticism over some of the factors (i.e. Australian bank in
trouble) that led to the AUD losing ground across the board. The AUD/USD was
trading around 0.8975 when the Australian employment data showed a rise of 26.8
K and unemployment falling to an over 30 year low of 4.1%. The AUD/USD jumped
above 0.9000 and eventually traded to 0.9032 before settling around 0.9020.
Volumes were fairly large, as shorts taken on the break below 0.8960 were
covered and fresh buying emerged on expectations rose that the RBA will hike in
March and again in May. The AUD was also boosted by a solid rise in Asian
equities. There was some selling between 0.9020/30 from a number of accounts
after two investment banks gave recommendations yesterday to sell rallies
between 0.9030/50. Sentiment is mixed towards the AUD/USD and a break above
0.9050 is needed to restore upward momentum.
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