Adam Horak

AUD/USD: Demand is noted at 1.0020.  1.0018 was today's Asian session low.USD/CAD: Bids are tipped near 0.9835 with sell stops touted below 0.9830 (0.9832 was the Feb 4, 33-month low).GBP/USD: Buy Stops are tipped above 1.6120/25EUR/JPY: Bracketed On 113-HandleEUR/JPY offers remain ahead of 114.00. Stops above. Bids from around 113.00. Some stops mixed in sub-112.90.USD/JPY: Bids Firm From 83.50-Area, Offers Pre-84.00.  The word is that some $2 yards or so of offers were absorbed as USD/JPY traded up from 83.80 to 83.98 overnight. Offers still ahead of 84.00, many looking to defend option strikes here and in 10-tick increments up to 84.50. Larger stops above 84.50, some from break-out system funds. Japan exporter interest trails up from 84.00. Bids firm from around 83.50, trail lower. Stops mixed in at around 83.45.EUR/USD: Traders Stops Above 1.3600 Tripped, Move AboveEUR/USD offers are seen ahead of 1.3625, some from US investment banks. More trader stops are seen above this level. Bidding interest was seen from model funds from the 1.3557 early low and, later, Asian sovereign names after more intervention against USD.EUR/AUD: Some Unwinding Of Shorts.  The cross edged up from 1.3504 to 1.3552 in Asia before easing off.AUD/USD: Exporters Still Good Buyers On Dips.  The early AUD/USD dip to 1.0058 saw local exporters buy again. Asian sovereign names joined in later. Offers noted between 1.0055-75. Exporter, sovereign account and real money fund players still look to buy dips whilst hedge funds and long-term longs look to sell into rallies towards 1.0100.Options: Talk Still Of USD/JPY KOs From 84.00 To 84.50.  The talk is that the KOs are placed in 10-tick increments between these two points. Stops are seen especially large above 84.50.Options: Slew Of Nearby Expiries Anchor Down Ccy Pairs.  Nearby option expirations today include vanilla USD/JPY 83.00, 83.50 (so-so large), 84.00 (so-so large), EUR/USD 1.3400 (so-so large), 1.3450, 1.3500 (so-so large), 1.3700 and GBP/USD 1.5900, 1.6000 and 1.6275 strikes.GBP/USD: Apparently well known US investment house has been seen selling cable in recent trade.  Not that we’re any lower mind you, presently at 1.6132.  Sell orders seen clustered up around 1.6150/55.  Stops probably not far north of there.See More

Over night the Green back hit its lowest levels of the year and on to a three month low against most major currencies. As the start of the US session gives way to a better then expected ADP report coming in just ahead of expectations a little life was breathed into the dollar as traders looked for risk aversion into the start of the trading day on a little profit taking for the day. This imbedded trend should be short lived as risk apatite should soon give way to continuation to the overall market trend and further sell off of the dollar and yen. What we are seeing setting up with strong manufacturing numbers out of the US and other countries, along with loose monetary policies set forth by the Fed this will fuel further risk taking. Remember risk appetite is often paid for with US Dollars and JPY Yen; so as risk appetite grows the Dollar and Yen look to decline further as capitol flows out of Treasuries and into Equities. I look for continued short term strength in commodity based currencies, AUD and CAD as oil and gold prices press higher with continued turmoil in Egypt. But look for strength out of the AUD, EUR and GBP on inflation expectations. I would expect to see monetary policy shift away from long term continued quantitative easing. Giving way to rate hikes out of the ECB and BoE. The ECB meets tomorrow Feb 3rd and we could see pressure put on the ECB to control inflation come out during Trichet’s accompanying statement tomorrow… Looking ahead to the week’s upcoming economic events there should be plenty of entry opportunities during both the European trading session and US session. See More

The Federal Reserve bank of NY purchased 2.2$ billion in Treasure bonds late Thursday morning causing a shift from the early morning slide of both the USD and JPY. Both pairs gained ground on the announcement as traders see this is a pledge to reinves cash from the maturing mortgage backed securities and look to shift capitol back in Bonds in an effort to strengthen the US economic recovery. The auction offered nearly 12 billion in debt maturing between 2021 and 2040. At this point I still see oportunity for the dollar to weaken further over the comming weeks and months and currently am looking for support in the EUR/USD around 1.3560; support of the GBP/USD around 1.5725 and AUD/USD support around 0.9611See More

Release Date: March 16, 2010For immediate releaseInformation received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.See More

Price actions has been mixed today throughout the US session as the FED started its surprise FOMC meeting today at 1530 GMT time. The USD is likely to face increased volatility throughout the first part of the trading week as the FED may look to adjust the discount arte by 25 bps to 0.75% following February’s adjustment. According to the FOMC “these changes are intended as further normalization of the Federal Reserves lending facilities.” This may bring traders to believe that we could likely see an increase of borrowing costs in the second half of 2010; as the recovery efforts are seen to be taking hold through a number of key economic indicators. Serviced-based activities in a number of the largest economies throughout the world are expected to expand at a faster pace then previously anticipated. Traders have factored in at least one rate hike more then likely for September FOMC meeting. At this point it appears not to be a decision of if the FED will hike rates but when and how many times.See More