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The Currency Futures Report

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Increase in Retail Sales , Home Prices Support Sterling

Tue, May 19 2009, 04:56 GMT
by Bob Kozak

Alaron

British Pound (BPM9):

Sterling opened higher at 1.5281 after a report showing Retail Sales and Existing Home Prices were better than expected. Prices rose to a morning Hi of 1.5314 against a weaker DX as higher equity prices weighed on the safe-haven benefit as risk appetite increased. Traders continued to bid prices higher early in the afternoon, hitting a mid-day level of 1.5336, before drifting lower towards the day-session close of 1.5316, up 157 tics. The s/t trend remains 'positive' w/firm momentum indicators. Higher equity prices overseas and 'buy' rec's from investment banks should push prices up to our Target Resistance of 1.5352.
Profit-taking in equity markets could support the DX. A higher open should find Resistance at 1.5397 and 1.5478, while an open below 1.5255 may find Support at 1.5174 and 1.5032.

Dollar Index (DXM9):

The DX opened lower at 82.88 as an increase in risk-appetite pushed equity prices higher and the DX lower to a morning Lo of 82.755. Continued pressure from higher equity markets and a stronger BP sent prices lower towards the close, ending the day-session at 82.77, down 37 tics. The s/t trend remains 'negative' w/ weak momentum indicators. Higher equity markets will continue to pressure the DX as risk-appetite increases, lessening the need for the 'safe-haven' qualities. Look for prices to test the Target Suipport of 81.98 on 5/13. A lower open may find Support at 82.52 and 82.27, while an open above 82.92 should find Resistance at 83.17 and 83.58.

Japanese Yen (JYM9):

The JY opened lower at 1.0437 as risk-appetite enticed 'carry-traders' to borrow JY to purchase higher yields. A downgrade of Japan's foreign currency debt to Aa2 and a report of Q1 GDP on Wednesday showing a potential drop of -16.1% weighed on prices. Prices dropped to a morning Lo at our initial Support level of 1.0427, before continued selling pressure sent prices to a daily Lo of 1.0370, ending the session at 1.0375, down 147 tics. The s/t trend remains 'positive' w/topping momentum indicators. An increase in the carry-trade could pressure the JY further, as traders borrow at .25% and purchase higher returns outside of Japan. Look for a test at the 10-day MA of 1.0370, unless the enthusiasam for equties is premature. A lower open may find Support at 1.0303 and 1.0232, while an open above 1.3499 should find Resistance at 1.0513 and 1.0652.

Published on  Thu, May 21 2009, 07:07 GMT