Market Rumours

The end of month book squaring is helping EUR/USD Friday, with the spot printing the day's high of 1.3615. A UK bank trader is hearing talk of stops above 1.3620 and says if triggered it could spark a rally toward 1.3700-50 before exhaustion. EUR/USD now at 1.3602.****Jeeson says -Secret is out :D

EUR/JPY fell to a fresh one year low of 119.66 Thursday and the cross is now oversold and bearish momentum surprisingly low says Mizuho Corporate Bank's Nicole Elliott. Because of this she expects the cross to hover above yesterday's low, although a weekly close under 120.70 will add downside pressure. For a strategy Elliott favors tiny longs at 121.25 with a stop below 120.70 looking for 121.50 and possibly 122.50 on the upside. EUR/JPY now at 121.44.

USD/JPY almost matched February's low of 88.55 Thursday, the dollar is not oversold and momentum is still not bearish, says Mizuho Corporate Bank's Nicole Elliott. She favors consolidation above 88.50 for Friday, but looks for another drop next week, eventually targeting 87.00. For a strategy Elliott favors small shorts at market, adding at 90.00, with a stop above 90.55. USD/JPY now at 89.30.

Dollar/yen currency options edged higher in Asia Friday, partly because some players bought hedges against wide fluctuations in the dollar amid mounting concerns over Europe's economic outlook. Moody's Investors Service Thursday reaffirmed that Greece's A2 debt rating may be cut if the Greek government doesn't reduce its ballooning deficit. That prompted Asian players to buy both upside and downside hedges, even though the dollar ticked up in Asian trading, dealers said. As of 0300 GMT, the U.S. unit stood at Y89.32 compared with Y89.06 overnight in New York. Benchmark one-month at-the-money options, as measured by implied volatilities, stood at 11.30%/12.00% as of 0200 GMT compared with 11.25%/11.95% in New York late Thursday. One player bought three-month at-the-money dollar/yen straddles at 12.4% with a roughly $100 million face value, a dealer at a major Tokyo bank said. The contract becomes profitable if exchange rates swing sharply. Traders said the U.S. unit may become more volatile versus the yen if any more news emerges of fiscal troubles in the eurozone, possibly buoying its options prices. "Demand for options is healthy, but the pace of gains in implied volatilities may not quicken" as long as the dollar-yen continues to pick up, a Tokyo bank dealer said.

U.K. to release revised 4Q GDP data at 0930 GMT; investors watching release closely as data "hold special importance for investor sentiment toward the GBP," says Barclays Capital strategist David Forrester. "Not only have they been a source of large downside surprises recently, the U.K. currently faces the ugly combination of elevated inflation and weak GDP growth." Dealers say if GDP misses forecast, GBP will fall sharply vs JPY, USD. GBP/USD last at 1.5266; GBP/JPY last at 136.39. Dow Jones poll of economists tips revised data to show +0.2% from previous quarter.

JPY currently outperforming since "the ebb and flow of risk aversion is offering support" to safe-haven JPY, says Morgan Stanley strategist Sophia Drossos. Still, Japan's weak economic fundamentals justifies a weak JPY, also Japan Finance Minister Kan's latest comments on deflation put further pressure on BOJ to ease more to fight deflation, strong JPY - another factor to push JPY down. She notes Kan sounds like targeting "a 1% GDP deflator target which translates into a 1.8% CPI target." Says "the BOJ never actually refers to an inflation target" but "Kan's language is much stronger and implies that action will be needed to achieve the target." After data earlier today show Japan's core CPI down 1.3% in January for 11th straight month of decline, Kan says "the CPI data show deflation is continuing. We need further effort to get out of it." USD/JPY last 89.35, tipped in 89.00-89.80 range.

EUR/USD trading at 1.3584, higher than 1.3560 in NY overnight as investors square positions to take profits since no new developments of Greece fiscal concerns, say senior dealers in Tokyo. "The only good news for the euro at the moment is that there really is no new news," says Barclays Capital strategist David Forrester. But bias remains downward as concerns linger - notes items to watch include weekend G-20 meeting in Korea for "potential sideline comments by euro area officials." Dealers tip EUR/USD trading range at 1.3530-1.3620. Morgan Stanley strategist Calvin Tse also expresses similar view, saying Greece issue should delay ECB's moves on monetary policy tightening in future. "We hold USD longs against the EUR. This is our strongest conviction view," Tse says.