Quite interesting that the Euro failed to take out the 1.3700 level today

Thu, Mar 11 2010, 10:10 GMT
by Per-Erik Karlsson

Market Comment

S&P futures looking like it will potentially to test the 1148 (2010 high) near term, but don’t expect any major rally above the 1160 level or so near term. We note that German Dax index upside contained by Sigma +2 band so far at 5960 today (2 standard deviation line). See the daily futures technical report for more info.

JPY repatriation flows was not able to support JPY today as it weakened across the board as S&P futures tested the 1148 high to the pin point, but no able to break. Quite interesting that the Euro failed to take out the 1.3700 level today, same day as the S&P failed to break this key 1148 level. We also note that even though the S&P futures have rallied strongly off the lows in February, but still Euro has not been able to do much on the upside. That certainly underlines the weakness in Euro for the moment. Still see good support down at 1.3480, which should hold this week. JPY will most like continues to be choppy and volatile, se we prefer to stay on the sideline as much as possible in JPY related pair for the moment.

Fitch out saying that UK could potentially loose the AAA rating unless austerity measures are clearly outlined, which is a serious blow to the budget plans. Weak UK manufacturing data saw GBP dip below the 1.49 level temporarily today, but recovered since on higher risk. We still have that potential reversal in the background that brings in buying interest below 1.48.

RBNZ holding rates at 2.5% and Bollard out saying they can afford to “wait and watch” before raising interest rates, which sent NZD lower and we expect more NZD weakness over the next few sessions. It looks very expensive to us.

The comments from China regarding Gold still seems to be a weighing factor on the markets and gold closed below the rising support from the February low that opens for a test of key 1088 support possibly.

Crude is trying to get towards the 84.37 key resistance level, not convinced it will be able to make that before we see another dip towards the 77 support level. Nat Gas tested the 6 months low yesterday and some signs of buying interest appeared, but in generally there is lots of Nat Gas supplies to not sure how much potential there is in a bounce, but we would be a bit cautious shorting as these levels unless 4.40 support breaks.

EURJPY vs. S&P 500 futures, the correlation between EURJPY and S&P 500 continue to diminish last 24 hours as the rally in EURJPY was capped Friday and Yen repatriation flow support Yen while S&P continues higher.

FX Implied Volatility updated this morning: 

Some interesting news stories:

Technical’s

Euro: We see near term resistance up at 1.3780 level with more key resistance up at 1.3850 level. Have to break these levels to really get any real momentum to the upside and below these levels it looks like a sell on rallies. Good support down at 1.3480.

Cable: Bearish below 1.52 and this level held Friday, sell rallies below this level. Next major support level is 1.4780, which is former resistance and break out level. Expect to see buying ahead of this 1.4780 level as the reversal higher last week looks still like a potential low.

USDJPY: Falling resistance from April 09 high coming in at 91.51 today, which needs to be taken out to open for any stronger move higher. We still favor buying dips as long as 88 level holds and longer term we still expect JPY to underperform due to high public debt, weak demographics and tougher export markets due to slower growth going forward. However keep in mind that repatriation flows should support Yen towards end of month (the Japanese fiscal year).

Swissy: We note that key falling resistance from the October 2009 high is coming in at 1.0869, which is level we have outlined for weeks to watch. A break above here would be significantly bullish and potentially open for a rally toward 1.15 to 1.17 levels.

AUDUSD: Good support above 0.8950 and with the 100 day moving average taken out it has scope to test 0.9329, the 2010 high.

USDCAD: Bearish momentum intact below 1.04 pivot level and key 1.02 support level that has held since July 2008 have to be taken out within the next few sessions to avoid a move to test 1.04.

EURJPY: Failed to close above 124.25 last week and bearish below this level for now. Remember the JPY fiscal year end flow until end of month should give support to JPY, but how much it difficult to judge. Expect more choppiness over next few weeks.

GBPJPY: Weak below for support at 138.30 and key support down at the 131.40 level that could be tested next.

AUDJPY: Key support at 76.30 has held so far and next resistance is now the 81.92 level (former rising support trend line from Feb 09 low, now resistance). We expect strong AUD and weak JPY going forward, buy dips.

Our outlook

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