GBPUSD also broke below the 200 MA this morning
Fri, Aug 20 2010, 13:51 GMT
by Per-Erik Karlsson
Market Comment:
Asian stock market summary:
- Nikkei 225 Index: -2.0% at 9,179
- Hang Seng Index: -0.4% at 20,981
- Australia ASX 200:
-1.1% at 4,430
- Shanghai Composite Index:
-1.7% at 2,642
3-month Libor rates:
USD: 0.329% v 0.339% prior
GBP: 0.724% v 0.727% prior
EUR: 0.829% v 0.832% prior
JPY: 0.239% v 0.239% prior
It is Friday and options expirations time and we have seen another choppy expirations week, which is often the case. No major US data out today.
The break below 1083 support on the S&P futures yesterday ignited the downside and it has been trading with a weak tone ever since. It even broke below the last reaction low at 1066 in European trading. Will be important what happens today in my opinion. If the S&P futures close below 1066, the focus is for test of 1050, which has been an important pivot level of the last few months. We have seen several strong moves as the price has crossed 1050 from both directions since start of the year basically, but specially last few months.
ECB’s Weber out earlier saying the ECB will likely raise the Euro zone growth forecast and the interest rates are appropriate and inflation should remain low over medium term. EU Commission formal report on Greece also out this am and it said that Greece’s fiscal austerity plans sufficient to meet the FY10 target. It also mentioned that it expects EU to approve the next tranche and that Greece had requested second part. However it was also stated that the budget information remained incomplete, but reaffirmed that it was not need for restructuring for Greece. I am not so sure about that statement, but of course that view will not come out until the crisis hits.
Ireland’s Central Bank Gov Honohan said earlier today that economic recovery in US and Europe were slower than hoped and said the sharp decline in the Irish economy was at an end and that it should be no doubt around the austerity measures.
The Euro has now broken below the rising support from the summer low and it looks likely that it will move lower towards 1.2522 support from 13th of July. GBPUSD also broke below the 200 MA this morning, but so far contained by support at 1.5470. Risk off is once again on the agenda and the failure to move above 1.5700 in GBPUSD following a series of positive data has put the focus back to the downside.
Regarding the JPY it seems that BOJ is not really ready to intervene yet as the move is not sharp enough. Fin Min Noda said they were in contact with other G7 nations regarding currencies.
It looks like close race in tomorrow’s Australian elections, with polls showing dead heat between PM Gillard and opposition leader Abbott.
VIX September futures traded above 30 yesterday and looks really expensive compared to other months. Looks like the market is pricing for a break below 1050 and run towards 1000 before expiration.
Technical’s
Euro: As outlined whole week the Euro looked weak after inability to break 1.2920 and the break below rising support this am opens for 1.2522. Have –3 sigma at 1.2478 that is an outlier target.
Cable: 1.5710 could not be taken out yesterday and we are back down, key support at 1.5470 and if broken we off to the races towards 1.5130 next.
USDJPY: Lots of longs in JPY and I cannot really see the reason for being long JPY, but the market is always right, so for now it is the down that is the trend. A close above 86 (0 sigma) would change that, so maybe wait for daily close above 0 sigma to get long. I think there is plenty of upside once the trend turns, so maybe better to be patient than to try and pick a bottom at the moment. Key support down at 84.70 and probably plenty of stops below.
Swissy: Tested low part of the recent range yesterday, but the close off the lows indicates buyers stepping in. Looks like more of the range 1.0250 to 1.0620.
AUDUSD: Was not able to take out 0 sigma over the last days and down it went as stocks took a hit. Looks likely to test the rising support at 0.8703 near term now. See resistance at 0 sigma of 0.9038 and 0.9136 as further resistance.
USDCAD: Big bounce off -1 sigma t 1.0160 yesterday and trading much higher today following softer than expected CAN CPI data and focus is back on +3 sigma at 1.0590 now.
S&P Future (ES): Break of 1083 sent ES down hard and it has basically lost 30 points since Wednesday. A daily close below 1066 last reaction low opens for a test of 1050 that I see as key support for now and the gateway to much lower levels.
Gold: Possible “no demand” bar from yesterday is causing the sell off today and we have key rising support at 1220 that should limit the downside for now. If the rising support breaks it would be a major concern for the bullish case and it would then target 0 sigma at 1200.
Crude oil: As indicated last report the confirmation bar on the bullish case was weak and we are now below the 74.19 key support level. Feels a bit like 68’s will be coming up in the not too distant future.
Also worth noting the rising support from May low has now been broken.
