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FAROS TRADING | Faros Morning Report

08/05/2010

Good Morning
NZD stole the show in the Asian session as weaker
employment figures sent the NZD/USD through 0.7300 to
test 0.7260 and we heard of decent prop buying of
AUD/NZD after the data. The cross looks poised to test
and potentially take out the 200 day at 1.2612 as the bank
rhetoric on long AUD/NZD has picked up notably.
JPY rhetoric was subued from Japanese officials but the
heavy exporter sell interest was still there in USD/JPY and
cross JPY. Early flows sent USD/JPY from 86.40 down to
86.20 and it found support ahead of 86.00 for now and
comes back 86.20 now. EUR/JPY talk was of good bids
around the 113.15 level and indeed those appeared to
hold.
There was commentary from a China PBoC official arguing for
even more flexibility in CNY to improve trade, also mentioned
encouraging settlement of trade in CNY. USD/CNY fixed higher
at 6.7783 which correlates well with EUR/USD trading lower in
the NY session.
Better GDP figures out of Indonesia as bank research desks
continue to discuss the improving economic situation in
Indonesia and the IDR continues to remain relatively strong.
USD/IDR traded down to 8930 area.
USD/KRW opened lower but rallied back as offshore names
were seen covering short term shorts and outflows were seen in
Korean equities for the first time in 11 days.
The London session started with everyone talking about risk-off
as the mood du jure but that was quickly reversed as EUR/USD
rallied aggressively after a healthy Spanish bond auction.
EUR/USD had traded as low as 1.3119 before ripping back
Through 1.3200 to trade 1.3220 and we are on the 1.3200 level
now. The 38.2% Fibonacci level remains the key at 1.3106 area
and the longer we trade above it, the more likely we test the
200 day at 1.3553 in the short term.
GBP/USD price action was similar as we traded down to 1.5820
on negative sentiment early in the London session but came
ripping back through 1.5890 to touch 1.5920 briefly and we
start NY at 1.5893 now. Feels like GBP/USD is going to have a
harder time making its next move higher given the speed with
which it got here and we see 1.6000 as critical resistance.
CZK is trading at a level that normally would concern the
central bank locally and they came out with no change on their
rate decision today. The 24.60 level in EUR/CZK is key there.
USD/ZAR took out stops through 7.2500 to touch 7.2000 and
we noted a good amount of volume through the level.
Offshore types were seen as the sellers and local names were
talking about better bids. Short term target is 7.1600 if we take
out 7.2000.
Hungary also had better auction results than expected and an
article discussing the Hungarian rejection of IMF support a few
weeks ago also made the rounds. EUR/HUF recently took out
280.00 and the 50 day at 282.14 and the 277/278 level is key
below.
Market rumors continue to circulate regarding a Shell / Encana
M&A transaction imminent. Given Encana’s market cap of
23.5bn, this has sparked a wave of EUR/CAD selling in the last
24 hours. Key level below and possible signal of a trend change
lower would be the 100 day at 1.3215.
Good Luck

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