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Greenback Bears Are Back

Rising on the day, euro longs were established against the greenback with a replacement of incumbent Treasury Secretary Snow sparking off the bidding.  Although pulling back slightly on the Paulson appointment, higher European M3 figures and a drop in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US consumer confidence fostered further dollar weakness in the late morning.  According to the Conference Board, consumers are feeling the pinch of higher energy prices and expressing some concern over underlying weakness in the economy.  With Paulson seen as mostly focusing in on the current trade shortfall, a 1.2900 option barrier was targeted before midday as the subsequent action kept the underlying pitted in consolidation heading into the North American Close.

Rumormill

Bids still are heavy at 1.2860 and lower to an extreme 1.2750 figure.  Resistance above at the key 1.2900 level and above look to provide some offers, notably at 1.2910 and 1.2950.

Technically Speaking

The hourly chart has the current underlying spot breaking through a textbook flag formation with a topside resistance at 1.2850.  With moving averages lining up for some upside momentum, the 10 and 25 look to place some considerable support should some selling add weight to euro longs.  Subsequently, paring should see support floors at the 1.2828 level which coincides with the 38.2 percent fib level from the days move.

GBP/USD

Pound bidding was in line with euro longs as news of a US administration shake up and subsequent appointment lent to strength in the majors and weakness in the dollar counter.  Breaking through London highs at 1.8800, the pair is taking out the figure and trading above near North American highs at 1.8870 as momentum looks to continue with a bounty of reports set for the next 24 hours.  Looking ahead, mortgage lending, GfK consumer confidence and Nationwide housing prices are expected, as is CBI Distributive sales figures.  Housing prices are expected to boost the underlying with expectations of a 5.1 percent rise on the annualized comparison lending to further long bidding on the pound.  A dip in Chicago are manufacturing should assist in the aforementioned.

Rumormill

Offers are heavy at the session high of 1.8870 and slightly above at 1.8880/85.  Bids are keeping the spot alive at 1.8790.

Technically Speaking

Similar to the euro flag, the sterling is seeing a textbook flag formation as the current underlying hovers the topside resistance.              Breaking through the 1.8800 figure, and subsequent trendline, momentum looks key as moving averages confirm the rise in accordance with the 10 and 25.  However, as with the previously mentioned EUR, a retracement is likely before any further upside can be realized.  Barriers at 1.8716 should provide for plenty of support as it coincides with prior floors and a downturn in both stochastic and MACD oscillators.

GBPJPY

Yen Consolidation Boosts Pound Cross Bid

Pound bidding took the carry trade favorite higher through the New York session as yen plays were kept in the wider 111-113 band that it has retained in the past couple of weeks.   Rumored option plays by a bigger Japanese institution are keeping the price contained allowing the reflection of sterling strength to be witnessed through the synthetic.  Going forward, Asian investment houses are seen bidding for cross and USDJPY currencies, keeping the yen supported and consolidated in the near term.