Read the Daily Forex Trading Analysis

Today’s US Dollar Trading
• USD holds gains but volumes drop
• US data mixed
• Higher equities and lower oil support USD

Overnight Preview
• Expect the USD to consolidate
• No real news out ahead of US CPI on Friday

Looking Ahead
All times EASTERN (-5 GMT)
• 8:30am USD Core CPI m/m 0.2%
• 8:30am USD CPI m/m 0.5%
• 9:55am USD Prelim Michigan Sentiment 59.5

Summary
The USD is holding onto gains this afternoon after surprise US data helped underpin the Greenback; traders note that although the USD strength this week has been significant the majors are holding key S/R. Volumes have been only moderate and suggest that more news or rhetoric will be needed to break the USD higher as stops were cleared today leaving less interest on the bid. Forex traders note that the EURO in particular may be bottoming again as several shops have said that offers dried up on the move under the 1.5400 handle today as “no one wants to be short EURO under 1.5400” traders say. In my view, the EURO has really squeezed out the weak longs and offered a lot of volatility the past 4-5 days suggesting that there is a serious fight for control of the market between 1.5400 and 1.5800; above the 1.5800 the bulls look for new highs above the 1.6050 area to fall quickly and below 1.5400 the bears look for a confirmation of a serious correction. Both sides appear locked in a major struggle and the first side to gain control will likely dominate trade for several weeks. Cable had lows at 1.9432 after US retail sales data showed a bigger than expected improvement but a short-covering rally never materialized and the rate stagnated around the 1.9460 area for the whole day. EURO low prints at the 100 bar MA were bought; closing around the 1.5420/25 area suggests a bounce is coming to end the week. USD/JPY continued to remain firm and tag the 108.00 handle; highs at 108.09 were on thin volume and the rate is laboring to hold gains. Exporters said to be seriously offering USD into the 107.80 area and above. Swissy also stalled at key resistance unable to make a break above the 1.0480 area with any confidence; high prints at 1.0492 before rotating lower to close under the 1.0430 area. In my view, this USD rally is a serious head fake and should be sold with both hands. Aggressive traders have a lot to work with now that we are at monthly highs and quarterly highs; expect the USD to fall back on big volume as the last bit of longs made their move today.


GBP/USD Daily

Resistance 3: 1.9580
Resistance 2: 1.9550
Resistance 1: 1.9500
Latest New York: 1.9477
Support 1: 1.9420/30
Support 2: 1.9400
Support 3: 1.9380

Comments
No follow-through on the day after two attempts for lows. Rate follows EURO lower into key support; a bounce is likely and aggressive traders can BUY under the 1.9500 handle. Spillover weakness from EURO still likely as would be strength. Technical objectives met at the 1.9500/50 area near-term; today could be a test of the lows. Continue to expect a lot of cross-trading; the cross-spreaders are having a field day with the Sterling crosses and I think that will continue through this week. Today’s action suggests that more two-way trade likely ahead of US data today.

Data due Friday: All times EASTERN (-5 GMT)


EURO/USD Daily

Resistance 3: 1.5500/10
Resistance 2: 1.5480
Resistance 1: 1.5450/60
Latest New York: 1.5422
Support 1: 1.5380/90
Support 2: 1.5350
Support 3: 1.5320

Comments
Rate fails to follow-through and holds the 100 bar MA. Strong buy signal coming soon if not yet later this afternoon. Rate falls on rumors and stops; could be a washout. Stopped out of position so we will look at the long side again to end the week tomorrow. Rate finds support as more rumors of semi-official demand. Stops noted on a break under the 1.5500 area. Late longs squeezed as comments from ECB officials slow upside. Support under the 1.5440 area appears solid. If buying today—ok to hold longs for a return to the 1.5800 area this week. Stops and bids noted at the 1.5580 area in size with option defense expected at 1.5550. Trichet hints at a rate hike for July but today’s rhetoric a bit softer; I think that is only to stem a rapid rise too quickly. Overhead resistance appears firmer on the approach to the 1.5800/20 area which is a likely to offer upside resistance through the rest of the week.

Data due Friday: All times EASTERN (-5 GMT)

2:00am EUR German CPI m/m
5:00am EUR Labor Cost Index
6:00am EUR Employment Change


Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky

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