USD/JPY eying resistance in 101.75/85/95 region

USD/JPY has resistance in the 101.75/85/95 region, so let’s say it has to clear 102.00 to excite the markets much. Stocks are enjoying a midday rally, up nearly 2%. EUR/JPY resistance begins around 137.20 and extends toward 137.45, a similar set up to USD/JPY. If stocks keep motoring, USD/JPY and EUR/JPY likely will too. Real sellers are not seen until 103.00 in USD/JPY and above 140 in EUR/JPY.

Asian central bank bids help underpin EUR/USD

Dealers note consistent buying in EUR/USD on dips from a smaller Far Eastern central bank. The market seems in no mood to go anywhere fast but the bid could be filled in if stocks open weak on Wall Street, which futures indicate they will. It trades quietly mow at 1.3425.

There’s a new kid in town

Custody banks have been a growing presence in the forex world for the last 15 years or so and their influence has been particularly acute during the financial crisis of recent weeks. Two factors seem to be driving the trend.

One is the massive repatriation by US investors as they retreat from overseas markets far and small as the secular decline in the dollar came to an abrupt end in July. The second factor has been the demise of some of the largest prime-brokers on Wall Street which has seen institutional investors moving their back-office business to the more prosaic custody banks. Mid-level players are suddenly flexing new-found muscle. Case in point, one Chicago-based bank is suddenly executing massive orders that have been regularly moving markets. Overnight, this name was said to have been a huge seller of Aussie as well. Keep your ears open for news of these new flows.

Real money accounts continue to lean on EUR/USD

All things considered, EUR/USD holds up pretty well. For more than a week now we’ve heard almost nothing but massive selling of EUR/USD from US real money accounts. You know, mutual funds, pension funds, endowments; those sorts of guys. They continue to sell this afternoon, just knocking the pair down to 1.3388 before a pop in equities helped boost the pair back up over the figure. The fact that the market has absorbed billions of euros in the last week is pretty impressive, when put into perspective. It also suggests that whomever is absorbing all these euros may be happy to let them go if we can rebound anywhere toward the 1.37/1.38 area.

More EUR/USD selling expected at fixing

The 15:00 GMT London fixing is expected to see another wave of EUR/USD sales. Asset managers are the heaviest users of the fixings and they have been the steadiest group of sellers of EUR/USD for the last week, a sign that US investors continue to yank billions out of overseas equity markets, in our view. EUR/USD trades at 1.3398.

Hedge funds, central banks and real money all dumping EUR/USD

EUR/USD is taking it from all sides this morning. The ugly equity backdrop is helping the risk aversion trade while the continued unwinding of positions by hedge funds, reserve adjustment by central banks and steady, unrelenting repatriation out of overseas markets by US investors all support the greenback. These are macro trends and have been in place since July, but they show no signs of abating.

Overnight lows at 1.3345/50 are in sight as we dip back below 1.3400.

Citadel rumors blamed for yesterday’s stock slide

Sure, we’re down 30%, but we’re not going out of business, says Chicago hedge fund Citadel. CNBC reports talk of a Citadel collapse helped spur yesterday’s late slide. Citadel acknowledges deep losses, but says there are not threatening the firms survival. That seems to have stabilized markets, at least for now.

EUR/JPY briefly breaks correlation with stocks

For a short while, EUR/JPY broke free of its shackles and rallied while equities were in the midst of a sell off. It looks as though it were a one-off order in a thin market, and once filled, the cross quickly slipped back below the 138 level. The cross squeezed out some intraday shorts in the process, sprinting to 138.60. 137.00 remains important support on pullbacks.

In USD/JPY, dealers have noted several flurries of US buying,  mainly from custody accounts. Looks like US investors continue to bring money home amid unsettled markets.

Custody names turn their attention to USD/JPY

Friday and Monday, custody banks were huge buyers of dollars versus euros. Today, they have turned their attention to USD/JPY. They are helping ramp USD/JPY into the 101.90s from the 101.50, helped along bu a rebound in equity markets. The Dow was down 300 at one point but has cut those losses to 120 points at present.

Buy the rumor/sell the news? Man, I hope not…

Stocks are well off their highs after the US became the latest big nation to fire its howitzer at the global banking crisis. Much of what was spelled out in detail today has leaked into the market in recent sessions and may already be reflected in yesterday’s 11% rally. I deeply hope not, for the sake of my 401K, but that may indeed be the case.

EUR/USD has broken the uptrend at 1.3650 after stalling early n the session shy of resistance at 1.3780. 1.3605/15 is now support on pullbacks with stoploss sell orders seen just below 1.3600.