Daily Forex Trading Analysis

Overnight Asia/Europe

• USD has consolidative overnight
• Traders await House vote on TARP
• Majors possibly at support

Today’s Economic Reports
All times EASTERN (-4 GMT)
• 8:30am USD Non-Farm Employment Change
• 8:30am USD Unemployment Rate
• 8:30am USD Average Hourly Earnings m/m
• 10:00am USD ISM Non-Manufacturing PMI

Looking Ahead to Monday
All times EASTERN (-4 GMT)
• 1:30pm USD FOMC Member Fisher Speaks
Light day across the board for Monday next week.

Summary
After a strong showing yesterday the USD is slightly weaker across the board this morning as traders await NFP and the House vote on TARP. Despite general bullish enthusiasm for USD volumes are light into New York trade and traders report stops above the market overnight suggesting that shorts are protecting gains. Overnight data was lower than expected; UK services PMI was 46.0 providing traders with another reason to sell GBP but the rate is holding the 1.7700 handle in early New York; high prints at 1.7738 in late European trade. Tracking the GBP slightly higher, EURO high prints at 1.3902 as light stops in-range at 1.3850 area were triggered; traders note volumes in both EURO and GBP were light overnight no doubt due to uncertainty over the news due out today. USD/JPY remains under pressure as demand for Yen crosses keeps the pressure on the USD; low prints at 104.85 saw light stops under the 105.00 handle but bids from importers held the rate off the lows. Traders note that Japanese data has been benign the last few days and most are waiting for news on the TARP vote. In my view, the USD has over-extended its upside move the past week or so and a correction lower is likely in the works for the end of the week today. All eyes are on the TARP vote this afternoon and the markets will be closed when the house votes; traders most likely will square positions ahead of the vote as most will not want to take a large risk over the weekend. In my view, the majors will likely rally next week if certain technical levels are met during today’s trade; most particularly I think the EURO needs a close over the 1.3850 area for the major fib defense to hold as a potential bottom. USD/JPY has rumored stops under the 104.40 area near-term suggesting that a break lower is possible today should the market focus on US data or be disappointed in the TARP vote. There is still a potential for the house to vote down the TARP plan although traders feel very confident that the bill will pass; a “no” vote will likely break the USD lower early next week. Look for the USD to remain consolidating most of today; I don’t think NFP will provide any surprises and traders will likely ignore the news preferring to wait for the House vote.


GBP/USD Daily

Resistance 3: 1.8180
Resistance 2: 1.8050
Resistance 1: 1.7880
Latest New York: 1.7662
Support 1: 1.7550
Support 2: 1.7500
Support 3: 1.7420/30

Comments
Rate is two-way and holding support after Thursday’s slide. Rate is likely heavily over-sold. Follow-on selling likely to attract short-covering around the double-bottom lows for Sept. US news started the move no doubt but traders say light volumes may be exaggerating the move; some spillover from EURO also likely. Aggressive traders can buy this dip; look for a recovery back to the 1.8600 handle near term. Two-way action likely near-term; heavy focus on bailout plan. Possible sovereign interest on the dip as semi-officials seen on dips in both EURO and GBP recently. Some stops triggered along with active selling by model accounts traders say. Major support has held for two weeks now, any weakness likely to be bought hard. Profit-taking bids continue as well. OK to buy any time in my view.

Data due Monday: All times EASTERN (-4 GMT)
Tentative GBP Halifax HPI m/m
7:01pm GBP NIESR GDP Estimate


EURO/USD Daily

Resistance 3: 1.4000/10
Resistance 2: 1.3950/60
Resistance 1: 1.3900/10
Latest New York: 1.3845
Support 1: 1.3740/50
Support 2: 1.3720/30
Support 3: 1.3700


Comments
Rate holds at the two-year 50% fib defense at 1.3850; rate is an absolute screaming buy in my view. Aggressive traders can buy anytime under the 1.3900 handle in my view. Traders note stops building above the market but those likely remain out of range today. Support at the 1.4330 area fails hard suggesting a point of resistance on the recovery, traders report semi-officials names on the bid. Expect more two-way action with upside bias; traders note the rate is firm on dips so far despite the uncertainty in the market. Traders suggesting that the rate is continuing to trade technically. Expect a solid higher close for the week. If long, look to add to positions on any weakness. Likely a dip back to the 1.4000 handle will offer a solid buy opportunity. Expect huge volatility if TARP fails to pass the house.
Data due Monday: All times EASTERN (-4 GMT)
4:30am EUR Sentix Investor Confidence

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Analysis Provided by: Forexpros.com - Written by Jason Van Jankovsky

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