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Daily Forex Trading Analysis

Overnight Asia/Europe

• Japan closed for minor holiday
• USD firm in two-way action
• Yen crosses in focus, mostly for Sterling


Today’s Economic Reports
All times EASTERN (-5 GMT)
• 11:00am USD ISM Manufacturing PMI
• 11:00am USD Construction Spending m/m
• 11:00am USD ISM Manufacturing Prices
• All Day USD Total Vehicle Sales


Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 10:00am USD Factory Orders m/m
• All Day USD Presidential Election
• 10:45am USD FOMC Member Fisher Speaks

Summary
The USD is mixed in solid two-way flows this morning after a muted start to the week; the Japanese markets were closed today for a minor holiday and volumes were light as a result. Forex traders note that liquidity was better, most notably against the GBP, and early trade was dominated by the EURO/JPY pair. Traders mostly on the bid for EURO overnight as most of the EURO pairs were higher; EURO high prints at 1.2899 with stops noted above the 1.2900 area and option barriers layered to 1.2950. Traders also note that semi-official names seen on the offer into the overnight highs suggesting that downward pressure may help continue a wider consolidation range. GBP had a high print at 1.6402 before selling pressure capped the rally; traders note that clearly the upside was due to cross-spreaders working the sterling crosses from the bid side. Solid two-way flows in both EURO and GBP suggest that consolidation in both pairs will continue ahead of economic data later in the week. More so as a source of near-term direction is the US presidential election on Tuesday. Traders note that either parties platform presents challenges to restoring job growth and economic prosperity. Some desks believe the USD will sell-off after the election and are positioning for that move; others feel a euphoric rally as a vote of confidence in the winner may result. In my view, it is likely that the USD will have a muted response because no matter which party wins the white house the USD focus has been on much bigger problems and either party has the work cut out for it. The USD/JPY is firm in solid two-way action as the Japanese holiday leaves many sidelined. High prints at 99.66 with lows at 98.21 making for a tight range compared to recent action. Traders note that black box systems on the offer for Yen overnight although volumes remained light. In my view, this morning is just “business as usual” for the majors. No real news is on the block for today and most traders are watching the fallout from the elections before placing a lot of faith in near-term USD direction. Most action today likely to be confined to existing ranges. Higher equities overnight may help US stocks today and possibly boost the USD but I think the ranges will hold. Look for another quiet night tonight as traders look to square-books ahead of the election.


GBP/USD Daily

Resistance 3: 1.6550
Resistance 2: 1.6480
Resistance 1: 1.6400
Latest New York: 1.6126
Support 1: 1.6000/10
Support 2: 1.5920
Support 3: 1.5800/10


Comments
Rate rallies back on cross-spreading but holds under previous highs; stops noted on the move higher suggesting shorts are late. Traders note stops and unwinding of Yen cross-spreads supporting the rate. Follow-on selling finds bids at prior low. Rate reaches fib retracement and resistance areas so a pullback may be over. Large range suggests more volatility coming soon. Traders note liquidity is better than last week. Aggressive traders can buy anytime on weakness but expect more whippy action. Two-way action likely to continue. Confirmed sovereign interest on the dip as semi-officials seen on dips in both EURO and GBP recently; lately middle-east names. Traders report cross-spreading for Sterling/JPY lifting the rate.
Data due Tuesday: All times EASTERN (-5 GMT)
4:30am GBP Construction PMI
7:01pm GBP Nationwide Consumer Confidence


EURO/USD Daily

Resistance 3: 1.3150
Resistance 2: 1.3030
Resistance 1: 1.2900
Latest New York: 1.2827
Support 1: 1.2660
Support 2: 1.2580
Support 3: 1.2500


Comments
Rate two-way in solid action; bids on dips from profit-taking shorts some desks report. Semi-official names on the offer near the highs with stops reported on a move over the 1.2900 area. 1.2700 handle to hold on a dip the first time but stops likely building underneath. Hook reversal showing from the toolbox suggests aggressive traders can buy the rate on dips. Rate possibly getting spillover effect from GBP. Support also from cross-spreaders as they unwind Yen. Official interest noted traders say. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers; conditions are right to buy on the next pullback in my view. If oil rallies it might take EURO with it. 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.
Data due Tuesday: All times EASTERN (-5 GMT)
5:00am EUR PPI m/m
All Day EUR ECOFIN Meeting

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

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