Daily Forex Trading Analysis

Today’s US Dollar Trading

• Traders note volumes and conditions at almost zero
• Stops drive a lot of the majors lower
• USD/JPY into the 97.00 area


Overnight Preview

• Look for consolidation and a quiet night
• USD likely to be sideways ahead of data


Looking Ahead to Thursday
All times EASTERN (-4 GMT)
• 8:30am USD Unemployment Claims
• 10:00am USD HPI m/m
• 10:35am USD Natural Gas Storage

Summary
The USD continued to advance against most majors but lost ground against Yen to end the day mixed and at new highs for the year. Stops were triggered in thin forex trade traders report suggesting that some bottom-picking has been done recently but the relentless one-way USD advance today made quick work of the USD bears today. Traders report that conditions were horrible and volumes almost non-existent suggesting that a potential bottom is once again forming. With most traders focusing almost exclusively on liquidity, bank lending and the financial crisis, it appears evident that finding a USD bear will be hard work. In my view, the charge higher by the USD is suspect because it can’t last due to the underlying fundamentals being what they are. Lately traders have ignored US economic data preferring to trade on rumor and conjecture; tomorrow is regular unemployment and Friday is Existing home sales; both expected to be negative for the Greenback. On the day, Cable sank like a stone for a low print at 1.6138 after the London fix as more dovish rhetoric from the BOE filtered through the markets. Traders note that order boards are blank after the 500 point move overnight and the 1200 point move the past 48 hours; most are looking for a bounce to at least hang a hat on. EURO likely fell in sympathy although some suggest the EURO led the decline; either way the EURO dropped through the 1.3000 handle for a low print at 1.2737 before a bounce was seen. Traders report model accounts selling the rate under the 1.2900 area. USD/CHF rallied also for a high print at 1.1714 in NY before falling back on profit-taking; mist expect a test for stops again over the 1.1720 area near-term and that may finally be the sell for a potential top. USD/JPY fell in line with equities weakness; the DJIA losing 460 points on the day heading into the close. Low prints in USD/JPY at 97.29; aggressive traders can sell more on the close at the 97.50 area. In my view, the USD rally has got to be nearing the end of this move; fundamentals don’t support it and the financial crisis is showing signs of mitigating as some banks are returning to normal operations. Once USD bulls figure out they are holding expensive USD I think at least a small correction will force a top in the rate. Look for quiet overnight action as volumes are light and a steady open in NY tomorrow ahead of US data.


GBP/USD Daily

Resistance 3: 1.6800
Resistance 2: 1.6730
Resistance 1: 1.6500
Latest New York: 1.6234
Support 1: 1.6130
Support 2: ?
Support 3: ?


Comments
Follow-on selling surprises to the downside; stops cleared and orders thin. Traders note solid bids but offers remain. Rate at new support level but ranges appears wider. Drop under the 1.6500 handle finds light stops. Monthly lows give way as sentiment won’t rally. Traders note quality bids on the dip suggesting a bottom is in here somewhere. Aggressive traders can buy anytime but expect more whippy action. Follow-on selling likely from technical’s but spillover strength from EURO likely to be better to end the week. Look for a recovery back to the 1.8000 handle near term; two-way action likely to continue. Confirmed sovereign interest on the dip last night as semi-officials seen on dips in both EURO and GBP recently. Traders report cross-spreading for Sterling crosses likely driving the rate near-term. Model accounts seen selling GBP and EURO overnight.
Data due Thursday: All times EASTERN (-4 GMT)
4:30am GBP Retail Sales m/m
4:30am GBP BBA Mortgage Approvals
Tentative GBP MPC Member Gieve Speaks


EURO/USD Daily

Resistance 3: 1.3300
Resistance 2: 1.3120/30
Resistance 1: 1.3060
Latest New York: 1.2832
Support 1: 1.2735
Support 2: 1.2660
Support 3: ?


Comments
More lows overnight; stops drive trade into next technical support. After all is done today the rate is unchanged from US opens. Option barriers reported on the dip but those are cleared. Model accounts seen selling the rate under the 1.2800 area. Official interest noted traders say but rate continued to sell-off. OK to look to the buy side now; rotation off the lows will likely signal a near-term bottom. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. Oil two-way spills over into pricing and if oil rallies it might take EURO with it. Traders note stops building above the market along with offers. Expect more two-way action with upside bias; traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market. Traders suggesting that the rate is continuing to trade technically. Traders note official names overnight this time.

Data due Thursday: All times EASTERN (-4 GMT)
2:45am EUR French Consumer Spending m/m
4:00am EUR Current Account
5:00am EUR Industrial New Orders m/m
9:00am EUR Belgium NBB Business Climate

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

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

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