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Today’s US Dollar Trading

• USD holds in two-way action, fails to extend ranges
• GPB holds support as does EURO
• Volumes again very light


Overnight Preview

• Look for more consolidation and two-way action
• USD to get quiet ahead of US data, equities drive overnight likely


Looking Ahead to Thursday
All times EASTERN (-5 GMT)
• 8:30am USD Unemployment Claims
• 9:15am USD FOMC Member Fisher Speaks
• 10:00am USD Factory Orders m/m
• 10:35am USD Natural Gas Storage
• 11:15am USD Fed Chairman Bernanke Speaks
• 4:30pm USD FOMC Member Kroszner Speaks


Summary
The USD continued in solid two-way action driven mostly by the changing fortunes of stocks the past 24 hours. Traders note that most of the volume in the major pairs was ahead of the London fix when equities prices were higher in New York; likely a late sell-off on the release of the Fed’s Beige Book contributed to the decline in stocks late in the day. Despite the heavy focus on equities today, lower Gold and Oil prices helped to help underpin the USD across the board but most pairs didn’t extend past early New York volatility this morning. GBP held the 1.4700 range all day not dropping or rallying despite recent large ranges; traders note that the market is on pins and needles regarding tomorrows rate announcement by the BOE. Most analysts are expecting a full 100 BP cut while others leave the door open for more. EURO is also lower but still holding the 1.2600 handle in light trade. The rate never regained the 1.2700 handle in late trade and it is likely the same scenario is in ply with analysts looking for a 50 BP cut or slightly more. In either case, the rate cut has been heavily discussed and is likely well factored-in to current pricing. A case of “buy the rumor/sell the fact” could develop after early whipsaw around the rate announcements. USD/JPY dropped to a new traded low today at 92.53 before regaining the 93.00 handle as stocks firmed mid day; the rate gives back those gains late as stocks wilt across the board. Traders note that large stops are likely resting under the 92.50 area suggesting that a lower open for the Nikkei may drop the rate hard on the open. USD/CAD rallied in “spooky” trade as thin conditions exaggerated the rally into the high print at 1.2671; the rate fell back to trade the 1.2500 handle and aggressive traders can be sellers above the 1.2580 area in my view. USD/CHF continues to grind into highs again on light volume; most of the action above the 1.2100 handle is likely late buyers and short-covering but traders note anything is possible with such thin volume. In my view, the USD is continuing to range trade and continues to sketch out a high. More bad news for the US economy is on the way this week and it is hard to build a bullish case for the USD when so much bad news is out there. Look for the USD to consolidate overnight ahead of US data in the morning. If the highs for the week are in the greenback is likely to make new lows ahead of NFP on Friday.


GBP/USD Daily

Resistance 3: 1.5680
Resistance 2: 1.5620
Resistance 1: 1.5550
Latest New York: 1.4760
Support 1: 1.4650/60
Support 2: 1.4600
Support 3: 1.4520/30


Comments
Rate forced lower into early Asia overnight but reverses into Europe. Stops triggered on the break but support holds at 1.4650 area. Rate sideways to firmer after London fix. Analysts suggest 100 BP rate cut coming on Thursday; probably already fully factored in. Good bids reported but supply seen from semi-official names.Forex trading demonstrated solid two-way action with stops cleared across several levels in both directions. Sellers hold control above 1.5100 area so far; OK to buy if flat on a dip. Profit-taking likely to result in a squeeze on the further strength. Technical trade overnight again. BOE rate cut increasingly likely but that is likely completely factored in at this point. Traders note liquidity is only moderate and still on the lower side. Aggressive traders can look to buy the next dip.
Data due Thursday: All times EASTERN (-5 GMT)
Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate
10:30am GBP CB Leading Index m/m


EURO/USD Daily

Resistance 3: 1.2950
Resistance 2: 1.2880
Resistance 1: 1.2750/60
Latest New York: 1.2676
Support 1: 1.2580
Support 2: 1.2550
Support 3: 1.2480


Comments
Rate continues to hold at support, possible sovereign interest on the bid. Late break with spillover from GBP clears stops under the 1.2700 area and 1.2620/30 area. Possible reversal now in play but the rate needs to firm above the 1.2850 area in my view. Bids are building under the 1.2600 area as expected; sell-off likely to be bought hard now. OK to try the long side again on a dip. Traders note stops building above the market around the 1.2750 area in size likely to help create some two-way action but initial try for stops misses with a high print at 1.2743 overnight. Support demonstrated on forex charts by cross-spreaders as they unwind Yen. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. Traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market.
Data due Thursday: All times EASTERN (-5 GMT)
5:00am EUR Revised GDP q/q
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference

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

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