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Overnight Asia/Europe

• USD remains flat after thin holiday trade
• Traders note light volumes and stops on both sides
• Technical action drives early action


Today’s Economic Reports
All times EASTERN (-5 GMT)
• None in the US
• Bank holiday for most G-7 countries


Looking Ahead to Tuesday
All times Eastern (-5 GMT)
• 8:30am USD Core Retail Sales m/m
• 8:30am USD PPI m/m
• 8:30am USD Retail Sales m/m
• 8:30am USD Core PPI m/m
• 10:00am USD Business Inventories m/m
• 10:30am USD FOMC Member Evans Speaks
• 12:00pm USD Fed Chairman Bernanke Speaks


Summary
The Easter holiday weekend continues for one more day as some Asian markets were closed overnight leaving the USD unchanged-to-lower from Thursday as traders focused mainly on the crosses into the start of New York this morning. Volumes were understandable light and traders note two-way action dominated by tech factors continued. Equities were higher overnight to start this week adding a bit to risk-acceptance putting the Greenback under slight pressure but the main focus remained the crosses with Yen rising against most of the major pairs; USD JPY still encountering upside offers around the 100.80 area again with high prints at 100.73 before pulling back to the 100.50 area in early New York. Traders note that Japanese investors remain long of the Yen keeping the tone supportive on dips. Low prints in the USD at 100.22 with stops noted on a break of 100.10 some desks say. GBP is higher holding slight gains with high prints at 1.4747 so far today; the rate opens New York around 1.4720 area with traders looking for a move over the 1.4780 area to trigger close-in stops. EURO is better from Thursday’s close after dipping under the 100 day MA over the weekend; high prints at 1.3218 with lows at 1.3125 making for a tighter range. Traders note a French name on the bid under the 1.3140 area suggesting possible official interest on dips; stops from model accounts noted above 1.3260 area arguing for tech and black box traders short the market on the dip under the 100 day MA. USD/CHF is failing on the highs from last week despite a solid close over the 1.1550 area; highs at 1.1610 were offered and the rate fell through 1.1550 area for low prints at 1.1506 and is on the lows to open New York. Traders note liquidation stops likely placed around the 1.1490 area from momentum accounts that likely went long on the close over 1.1550. USD/CAD had a tight range to start the week with highs at 1.2288 and lows at 1.2238; holding the 1.2240 area in early New York trade. Of all the pairs this morning the USD/CAD is looking to weakest some desks say due to the failure at the 1.2280 area near-term. Analysts suggest a close below the 1.2220 area will turn the charts negative arguing for a test of the 1.2180 area leaving the rate vulnerable to a further extension of losses from the 1.3000 area seen the past month. In my view, the Greenback is continuing to consolidate the recent gains as corrective and not as strength. The USD is likely headed for a test of the lows seen after the break from the 3-year highs. I don’t see the underlying fundamentals as being overly supportive and should the equities markets continue to attract risk investors they will move cash as the sense of panic mitigates further. Look for the USD to remain two-way today through US data due tomorrow; likely the news will show continued contraction in the US economy suggesting potential for a weaker USD.


GBP USD Daily

Resistance 3: 1.4880
Resistance 2: 1.4840/50
Resistance 1: 1.4780
Latest New York: 1.4738
Support 1: 1.4580
Support 2: 1.4550
Support 3: 1.4520


Comments
Rate falls through stops in-range but holds support at 1.4600 area; rate is holding the 100 day MA nicely ad aggressive traders can look to buy dips. Pullback being bought by large names traders say. Stops above the market from late shorts around 1.4720 forex signals area cleared for yet another time as the rate rallies overnight; large stops said to be around 1.4780 area. Traders note support is likely firm at the 1.4450 area as expected. Close over 1.4900 argues for further gains but tech resistance is firm ahead of 1.5000. Overhead target of the 1.5000 area likely to trade but expect pressure. Traders feel the 23-year lows will likely remain secure. The shorts may have lost control of the market above the 1.4440 area now and if that is the case a test of the 1.5000 area is almost a done-deal. Traders report stops in-range adding for two-way action.
Data due Tuesday: All times EASTERN (-5 GMT)
7:01pm GBP RICS House Price Balance


EUR USD Daily

Resistance 3: 1.3480
Resistance 2: 1.3420
Resistance 1: 1.3340
Latest New York: 1.3206
Support 1: 1.3150
Support 2: 1.3120
Support 3: 1.3100


Comments
Rate has liquidation break into close-in stops over thin weekend but large names show up on dips traders say taking advantage of conditions. Traders note good sellers above the market but they may be late as traders note protective stops from model accounts around 1.3260 area. Traders report sovereign interest on the dip. Offers likely waiting back at 1.3330 area but stops are said to be building in size above the 1.3340 area. Rate is firm and possibly set to reverse. Rate appears solid above the 100 day MA. Foothold over the 1.3500 handle needed to extend to the upside. Rate likely has stops building in both directions; overhead resistance at 1.3330/50 area back in play as initial support expected fails. Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view. Looking to buy this week again if 100 day MA continues to hold.
Data due Tuesday: All times EASTERN (-5 GMT)
NONE


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

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