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Overnight Asia/Europe

• USD two-way and mixed, S/R holds overnight
• Volumes low, traders report stops building in-range
• Overnight news nothing to speak of


Today’s Economic Reports
All times EASTERN (-5 GMT)
• 10:00am USD Pending Home Sales m/m
• All Day USD Total Vehicle Sales


Looking Ahead to Wednesday
All times Eastern (-5 GMT)
• 7:30am USD Challenger Job Cuts y/y
• 8:15am USD ADP Non-Farm Employment Change
• 10:00am USD ISM Non-Manufacturing PMI
• 10:30am USD Crude Oil Inventories


Summary
The USD is mixed to open New York after a generally two-way overnight session that saw the majors on the plus side in late Asia/early Europe before returning to about unchanged from Monday. Traders note volumes continue on the lighter side and overnight data was benign with most of the focus on the Yen crosses after comments from the BOJ that they will not be buying bank shares at this time. Yen crosses fell as general demand for Yen pushed the pairs into the lows. USD JPY remained resilient in the selling and held the 89.00 handle for a low print at 89.26; traders note bids ahead of 89.00 supported initially. High prints in the rate at 89.99 with residual offers at the 90.00 and above capping the action as expected, analysts note that the rate continues to post slightly higher lows and pressure the same general areas to the upside suggesting the USD/JPY is trying to break out to the upside for a long overdue short-squeeze. In my view, aggressive traders can buy the rate on dips looking for a test of close-in stops likely layered above the 90.50 area an above. EURO saw sellers above the 1.2850 area but managed a high print at 1.2915 slightly over yesterday’s high but fell back to find bids around the low print at 1.2800 even; traders note that stops are likely in range around the 1.2790 area but the rate is higher into early New York around 1.2860 area suggesting the rate will look for stops above the 1.2920 area. GBP continues to hold above the 1.4200 handle; an early dip to the lows at 1.4152 was bought quickly and the rate is near the overnight highs of 1.4275 to open New York. Forex traders note the GBP crosses were under pressure but the rate is holding an inside range day trading higher suggesting a pause before further upside. USD/CHF is probing for stops said to layered under the 1.1560 area; high prints at 1.1670 were inside-range from Monday and lows extended to 1.1568. The rate held the lows twice but currently is 1.1580 after bouncing into the 1.1620 area suggesting that the rate is not attracting bids at current levels. USD/CAD is holding gains in the 1.2400 handle with a high print at 1.2525 before backing off to the 1.2450 area suggesting that the 1.2500/20 area may be technical resistance. Aggressive traders can look to sell the rate on a re-test of the 1.2520 area near-term. In my view, the Greenback is continuing to consolidate recent gains against the majors but is showing signs of cracking. Today’s US housing data likely will be another negative report lending some pressure to the USD. Look for the Majors to put on some weight today and into Wednesday’s data.


GBP USD Daily

Resistance 3: 1.4400
Resistance 2: 1.4350
Resistance 1: 1.4280
Latest New York: 1.4233
Support 1: 1.4150
Support 2: 1.4080
Support 3: 1.4000/10


Comments
Rate drops back after an up week last week; likely a correction and a buying opportunity as the 23 year lows are very likely to hold. Possibly unwinding of GBP crosses pressuring the rate back to and above the 1.4300 handle near-term. Light stops seen on the move under 1.4200 with likely active selling dropping into lows overnight but the rate is recovering in early New York. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Short-squeeze taking a break; need sharp rally after this dip to argue for continued upside. Rate trading on technical’s now. Signs of the bottom may be showing up as “smart” buyers reported in GBP last week. Spillover from EURO likely but modest. Look for two-way action into this bottom. A short-covering rally is increasingly likely now. Late sellers likely in or hurting.
Data due Wednesday: All times EASTERN (-5 GMT)
4th-6th GBP Halifax HPI m/m
4:30am GBP Services PMI
5:30am GBP BRC Shop Price Index y/y


EUR USD Daily

Resistance 3: 1.3020/30
Resistance 2: 1.2980
Resistance 1: 1.2920
Latest New York: 1.2856
Support 1: 1.2700/10
Support 2: 1.2650
Support 3: 1.2620


Comments
Rate follows GBP in two-way action today then rebounds, cross-spreaders likely pressure as crosses are unwound during the day. Two-way action overnight in light volume as stops get triggered under 1.2850 area and below but sellers run out on support at the 1.2800 handle; trades report stops building in-range around the 1.2790 area. Major resistance is now back at 1.3030 area and a close back above there argues for another test of the 1.3300 area weekly highs. Downside bias may be running out as rate is now on solid support numbers around the 1.2700/20 area. Pullback argues the squeeze is over. Bulls are still attempting to find a bottom. 50 bar MA failed now likely to offer resistance and a close above suggests the bottom will be in. Technical levels around the 1.3300 area now likely to offer resistance so expect two-way action and consolidation. Aggressive traders can look to buy the next dip.
Data due Wednesday: All times EASTERN (-5 GMT)
4:00am EUR Final Services PMI
5:00am EUR Retail Sales m/m


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

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