Daily Forex Trading Analysis

Today’s US Dollar Trading

• USD holds stable after two-way overnight
• US news negative but ignored again
• Volumes and liquidity thin again


Overnight Preview

• Look for more two-way action
• USD likely to hold ahead of US data

Looking Ahead


Summary
The USD is a bit softer to end the day but still holding overall gains this week; EURO is slightly higher to end the day as is Swissy and Loonie but for the most part today’s action was a non-event. Forex traders continue to complain about thin volumes and poor liquidity across the board but some banks are beginning to loosen up on credit some desks report. Although today’s US data was largely ignored it was USD negative suggesting that once things return to “normal” traders will find themselves holding a lot of expensive USD relative to underlying fundamentals. The Greenback may be topping a bit as today was the first down day for the USD since Monday attracted some bids in EURO and CHF suggesting that traders may be taking gains on older USD longs. In my view, the majors have likely dropped about as far as they can go under current sentiment; a bounce is needed to keep the markets healthy going forward. GBP fell to a new 5-year low at 1.6035 before attracting bids; likely some strength from EURO spilled over. EURO made a high for the day in New York trade reaching 1.2892 before falling back on aggressive selling. EURO held the 1.2800 handle all day and closed in the top 20% of its range today making a technical buy signal. USD/JPY continued to drop on repatriation needs as the Yen dominates near-term action. Low prints at 96.17 before some bids were seen but the fact remains that traders see the 95.00 handle as inevitable before any meaningful bounce will be seen. Equities lower helped to push the rate lower but a sharp rally in the last hour of equities trading opens the door for a potential rally in the USD/JPY. In my view, the rate is headed under the 95.00 handle and aggressive traders can add to open shorts on the break. Loonie may be topping as well as the rate failed at the 1.2700 handle this morning. Currently off almost 200 points from the highs, Loonie appears ready to finally correct lower as a hook reversal plays out . Look for the USD to continue sideways to lower overnight as Friday’s US data likely to be unfriendly again. Sooner or later the USD will have to reflect the underlying fundamentals.


GBP/USD Daily

Resistance 3: 1.6800
Resistance 2: 1.6730
Resistance 1: 1.6500
Latest New York: 1.6141
Support 1: 1.6050
Support 2: ?
Support 3: ?


Comments
Follow-on selling lacking overnight; rate holds lows and bounces. Possible point of indecision so OK to BUY the dip. Traders note solid bids again but order boards thin and liquidity is poor. Rate at new support level but ranges appears wider. 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 Wednesday.
Data due Friday: All times EASTERN (-4 GMT)
4:30am GBP Prelim GDP q/q
4:30am GBP Index of Services 3m/3m


EURO/USD Daily

Resistance 3: 1.3300
Resistance 2: 1.3120/30
Resistance 1: 1.3060
Latest New York: 1.2894
Support 1: 1.2720/30
Support 2: 1.2660
Support 3: ?


Comments
More lows overnight; stops drive trade into next technical support. After all is done today the rate rallies into the close suggesting a pause in the selling; hook reversal possibly signals a reversal. 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 pressure likely 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 Friday: All times EASTERN (-4 GMT)
2:00am EUR German Import Prices m/m
3:00am EUR French Flash Manufacturing PMI
3:00am EUR French Flash Services PMI
3:30am EUR German Flash Manufacturing PMI
3:30am EUR German Flash Services PMI
4:00am EUR Flash Manufacturing PMI
4:00am EUR Flash Services PMI

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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