British Pound Pares Gains after Sharp Rise on Friday

After coming within 5 pips of 2.05 at the onset of the European trading session, the British pound reversed course to end the day lower against the US dollar. Like companies in the Eurozone, companies in the UK are also being hurt by the recent strength of the British pound.Like companies in the Eurozone, companies in the UK are also being hurt by the recent strength of the British pound. Last Friday, Tate and Lyle PLC warned that earnings could be weak over the next six months as a direct result of the dollar’s weakness against the British pound. If economic data continues to surprise to the downside this week, expectations for a surprise rate cut on Thursday will grow. Prime Minister Brown said this morning that they will take no risks with the economy. After harsh criticism last month on his response to the Northern Rock problems, Bank of England King probably feels the same way.

crosses technical analysis 02-10-2007

GBP/JPY

The Pound inclined yesterday against the Yen and reached the target at 237.00s yet could not breach it, as the pair declined back; the target is still the same at the 237.00s, and the point at 234.68 seems to offer good demand for the pair.

EUR/JPY

The Euro also gained against the Yen yesterday before starting heading to the downside in a correctional move, and the target is the 166.12, and the point at 163.40 seems to offer good demand for the pair.

EUR/GBP

The Euro gained back against the Pound, as the pair started heading towards the upside today to continue the general upside trend, the long term target is the 0.7078 level, and the point at 0.6941 seems to offer good demand for the pair.

Major Technical analysis 02-10-2007

euro

The European currency dropped down yesterday since it found tendency to move towards the key support level at 1.4210. We expect the downside move has ended by hitting the mentioned support, by which the Euro might rebound to the upside today.
The trading range for today might be between the key resistance level at 1.4320 and the key support level at 1.4150.
The general trend is up as far as 1. 3470 remains intact targets now at 1.4500 and 1.4780.
We expect buying Euro above 1.4220 with a target at 1.4300, stop loss below 1.4180.

gbp

The low volume played a significant role to restrict the British pound’s movements yesterday to fluctuate in a balanced pattern since it couldn’t breach the tough resistance level at 2.0490s to fall until the levels of 2.0370s to record the low. Nevertheless, today we expect a bullish move to hold the pound up until the previous resistance at 2.0530s.
The trading range for today might be between the key resistance level at 2.0560 and the key support level at 2.0350.
The general trend is up as far as 1.9700 remains intact targets now at 2.0635 and 2.0740.
We expect buying sterling above 2.0420 with a target at 2.0520 stop loss below 2.0370

jpy

The dollar against the Japanese yen tended to move in a bullish pattern towards the tough resistance level at 116.00 within the same lateral trading channel. This consolidation was due to the restrictions that the currency has made with the narrow ranges.
The trading range for today will be between the key resistance at 116.20 and the key support at 113.80.
The general trend is down as far as 124.60 remains intact, targets at 112.40 and 111.20.

crosses technical analysis 01-10-2007

GBP/JPY

The Pound gained heavily against the Yen, and reached the targets we talked about earlier, now the first target is set around the 237.00 levels, and the point at 234.71 seems to offer strong demand for the pair.

EUR/JPY

The Euro gained against the Yen as well, and the new target is set to be at the 165.76, even if some of the technical indicators started to show the pair is entering an overbought area yet the general trend remains well to the upside, and the point at 163.56 is the first demand point for the pair.

EUR/GBP

The Euro lost ground against the Pound, as the pair started heading to the downside in a correctional move, yet the 1 hour RSI and Stochastic Slow indicators show the pair resides in an oversold area, and the point at 0.6941 seems to offer the first demand for the pair.

Asian Market Update

Asian Market Update: The BoJ’s Q3 Tankan suvey came in mixed. The large manufacturers component (Q3 TANKAN LARGE MANUFACTURERS: 23 V 21E (23 PRIOR)) and the large all industry CAPEX (Q3 TANKAN LARGE ALL INDUSTRY CAPEX: 8.7% V 7.5%E (7.7% PRIOR) ) components were better than expected. However the large manufacturers outlook component came in worst than expected (OUTLOOK: 19 V 20E (22 PRIOR) and the non-manufacturing components of the survey also came in soft (Q3 TANKAN NON-MANUFACTURING: 20 V 21E (22 PRIOR); OUTLOOK: 21 V 21E (23 PRIOR)). Following the release of the Tankan, Bank of America reiterated its call for a 25 bps rate hike by the Bank of Japan in December. In terms of market reaction, the Tankan had a muted affect on yen trading, while equities rose following the data. Despite the strong tankan reading, both the 10 yr and 2 yr Japanese government yields are lower. In other Japanese data, Aug labor cash earnings rose for the first time since November of 2006 (AUG LABOR CASH EARNINGS YOY: 0.1% V -1.7% PRIOR; OVERTIME EARNINGS YOY: 1.2% V -0.1% PRIOR).

Forex: The JPY is weaker across the board on carry trades (USD/JPY above 115.00). The EUR is lower against the USD (profit-taking), while the GBP/USD pair is off by more than 0.09% (profit-taking). The NZD and AUD are both near session highs against the USD and JPY. During today’s session, the AUD rose to an 18 yr high against the USD (above $0.8900). The CHF is near session lows against the USD, EUR and GBP following reports out of the Wall Street Journal that Swiss bank UBS is expected to report a fixed income related loss of CHF600M-CHF700M. The USD/CAD is higher by more than 0.10% (last traded around $0.9941).

Asian Currencies: The Taiwan dollar (TWD) is higher by more than 0.40% against the USD on reports that the Taiwan central bank will continue to hike rates in order to lower inflationary pressures.

Equities: The Nikkei 225 is higher by more than 0.35% on gains in shares of exporters and banks. The ASX 200 is higher by more than 0.35% on gains in shares of BHP and Newcrest Mining. Over the weekend it was reported that BHP may not seek to bid for Alcoa. The Kospi is higher by more than 1% on gains in shares of LG Philips (positive broker commentary) and LG Electronics (price target raised by a local broker)

Commodities: Spot Gold is marginally higher in Asian trading, but below $750/oz. Crude Oil is little changed in Asia on lower storm threats in the Gulf of Mexico.

Major Technical analysis 01-10-2007

euro

Last Friday was a one of the strongest bullish days for the European currency, where the euro managed to hit new upside records supported with the high levels of momentum reflected in the trading volume. Today we expect a slight correction towards the downside in terms of gathering momentum to then pursue the upside targets once again.
The trading range for today might be between the key resistance level at 1.4320 and the key support level at 1.4150.
The general trend is up as far as 1. 3470 remains intact targets now at 1.4500 and 1.4780.

gbp

The British pound last week arranged a strong bullish pattern after it hit the major support level as the low as 2.0180s, launching from there the upside potential reaching to the key level at 2.0480s. This move created another bullish pattern to set the targets at 2.0680s; nevertheless today the pound is expected to hit the major resistance level at 2.0510 then its expected to reverse back towards the downside in a slight correctional move.
The trading range for today might be between the key resistance level at 2.0530 and the key support level at 2.0360.
The general trend is up as far as 1.9700 remains intact targets now at 2.0635 and 2.0740.
We expect selling sterling below 2.0510 with a target at 2.0450 stop loss above 2.0550

jpy

The dollar against the Japanese yen clearly moved towards the downside as it couldn’t breach the major resistance level at 115.60s to extend the downside channel to hit the key support level at 114.70s; today we expect the pair to progress towards the downside until 114.00 levels.
The trading range for today will be between the key resistance at 115.50 and the key support at 113.80.
The general trend is down as far as 124.60 remains intact, targets at 112.40 and 111.20.
We expect selling USD/JPY below 114.90 with a target at 114.15, stop loss above 115.35

Week of 10/1/2007 thru 10/5/2007

Monday, October 01, 2007

Economic
10:00am Sep ISM Manufacturing (last 52.9), Sep ISM Prices Paid (last 63)

Events
FinancialTimes Commercial Property Conference, Bear Stearns & Co Inc. LondonCDO Conference, Opal Financial Group Private Equity Summit forInstitutional Investors, EXPE added to S+P 500 after the close, Trades Ex-split: NOV 2-1 Trades Ex-dividend: KIM $0.40, DGX $0.10, TTC $0.12

Earnings
Before the Open: WAG After the Close: ANGO, PALM

Tuesday, October 02, 2007

Economic
10:00am Aug Pending Home sales (m/m last –12.2%)

Events
1:00pm Fed’s Fisher Speaks to Dallas Chamber of Commerce,Sep total Vehicle Sales (last 16.3M), Sep Domestic Vehicle Sales (last12.7M), KSS Analyst Meeting, 2007 Private Equity Energy Forum, CienaAnnual Analyst Day, DB Global CDO and Credit Opportunity FundConference, DB Leveraged Finance Conference, ICSC/UBSW Chain StoreSales (7:45am, last 2.4%). Redbook Retail Sales (8:55am, last 1.6%).ABC Consumer Confidence (last -11). Trades Ex-split: JCI 3-1, PH 3-2,MNRO 3-2, CLDA 3-2, SLP 2-1 Trades Ex-dividend: ALOG $0.10, CAE $0.18,CBH $0.13, BEN $0.15, ERIE $0.40

Earnings
Before the Open: PBG After the Close: None Seen

Wednesday, October 03, 2007

Economic
7:30am Sep Challenger Job Cuts (y/y last 21.7%)
8:15am Sep ADP Employment Change (last 38k)
10:00am Sep ISM Non Manufacturing (last 55.8)
10:30am Crude Oil/Gasoline/Distillate Inventories

Events
DeutscheBank Strategy & Solutions Derivatives Conference, StrategicResearch Institute Annual Energy Tech Investor Conference, MBA MortgageApplications (7:00am, last –2.8%). Trades Ex-split: BCSI 2-1 TradesEx-dividend: AXP $0.15, BMY $0.28, CHH $0.17, DFS $0.06, FFHS $0.09, GD$0.29, JPM $0.38, MKC $0.20, MDT $0.125, MON $0.175, PLL $0.12, SAF$0.40, SYY $0.19,

Earnings
Before the Open: RPM, WWW After the Close: ARRO, BLUD, SMOD

Thursday, October 04, 2007

Economic
8:30am Initial Jobless Claims (last 298K), Continuing claims (last 2.5M)
10:00am Aug Factory Orders (last 3.7%) 10:30am Natural Gas Inventories

Events
12:45pm Fed’s Fisher speaks to economists in North Carolina, 1:30pm Fed’s Mishkin speaks at event for Deutsche Bank Prize,Informed Investors Real Estate Conference, Think Equity Forum forHealthcare InvestorsTrades Ex-split: TAP 2-1 Trades Ex-dividend: BBY$0.13

Earnings
Before the Open: AYI, CYCL, STZ, FDO, GRB, ISCA, MAR, MTRX After the Close: LWSN, MU, NINE, PLL, RIMM, ZZ, SLR, THO

Friday, October 05, 2007

Economic
8:30am Sep Non Farm payrolls (last –4K), Sep Unemployment rate (last 4.6%),Sep Manufacturing payrolls (last –46K), Sept Average Hourly Earnings(m/m last 0.3%, y/y last 3.9%), September average weekly hours (last33.8)
3:00pm Aug Consumer Credit (last $7.5B)

Events
9:10am Fed’s Kohn speaks on economic outlook in Philadelphia, 7:00pm Fed’s Warsh speaks on Financial Markets at Siena College,Financial Research Associates Hedge Fund Financial Reporting Seminar,Trades Ex-dividend: DRI $0.18, GIS $0.39, JCP $0.20, ETH $0.22, LNC$0.395, VZ $0.43

Earnings
Before the Open: EMMS, MERX After the Close: None Seen