Overnight Asia/Europe
• Greenback starts firm then falls in Europe
• Lots of rhetoric from Europe
• Technical trade dominates
Today’s Economic Reports
• None in the US
Summary
The USD is slightly weaker this morning after a quiet start in Asia last night; traders note that firmer equities in Asia had no impact on USD/JPY this time and most feel that the market is sidelined ahead of FOMC rate announcements on Wednesday. Desks report some early demand for USD/JPY but once the European markets opened the demand fizzled; high prints in USD/JPY at 104.83 after a slow start. Exporters are noted to be ready on the offer at 105.00 with stops resting above traders say. GBP had a slow start as well but follow-through bids from Friday lifted the rate into early stops at the 1.9850/60 area and a high print in Europe at 1.9913 before dropping back when selling emerged in the EURO-Sterling cross; lows in Asia currently unchallenged at 1.9780 in early NY trade. Lots of rhetoric out during European trade and some data; traders note that the EURO seems heavy at the highs after the release of CPI data but the rate is still firmer on the day; high prints at 1.5694 with lows at 1.5592 making for some volatile trade early. ECB Mersch had no comment on the report but did emphasize that the bank is still concerned with upside risks to inflation; traders note that the market is braced for no ECB rate cut until at least Q4 2008 but note that dips are bought at key technical levels suggesting that at least for the near term the EURO will remain more two way even in a correction. Traders holding open shorts in EURO and GBP can sit tight for now as it appears that the technical S/R levels will contain dips and rallies; stops on the other side of those levels likely to be growing in size as the market is looking for a decisive move by the Fed with more rate cuts to come; if that is not the impression the markets get on Wednesday then the USD may rally hard against the European currencies. Other major pairs remain range-bound and technical in nature this morning; USD/CAD has had a volatile morning so far and buying dips seem to be the favored move to start the week. Look for the Greenback to consolidate today and into tomorrow; it’s a light calendar until then. Aggressive traders can trade from both sides as the USD is likely to cover a lot of the same ground twice.
GBP/USD
Resistance 3: 1.9980/90
Resistance 2: 1.9950/60
Resistance 1: 1.9910/20
Latest New York: 1.9883
Support 1: 1.9750
Support 2: 1.9690/1.9700
Support 3: 1.9650
Comments
Rate bounces nicely on lighter volume, should be a “dead cat bounce” Closing under the 1.9800 the next 24 hours likely set the stage for a return to lower prices early in the week.
Upside is limited in my view but ranges can be wide as evidenced by the past 72 hours of trade. Sell rallies if not short; buying dips dangerous in my view.
Drop to under the MA’s very important in my view. Long selling wick makes sell side attractive for further losses. Need down bars with higher volume to confirm.
EURO/USD Daily
Resistance 3: 1.5750
Resistance 2: 1.5720/1.5730
Resistance 1: 1.5690/1.5700
Latest New York: 1.5633
Support 1: 1.5590/1.5600
Support 2: 1.5550
Support 3: 1.5520
Comments
Market has failed at 1.6000 area resistance with confidence now, be patient on the potential break.
Overhead resistance is heavy above the 1.5750 area; traders say offers extend into the 1.5800/30 area with stops above.
Two-way trade at resistance to start on Monday suggests a deeper pullback is in the works.
Strong long-liquidation break is still coming; look for a test of the lows again within 24 hours. Watch for two-way volatility. Be ready to add quickly if a rally happens; likely to fail quickly.
Today a close back under the 1.5600 handle very important; look for a test of the 1.5550 area early this week, offers likely on a rally to 1.5700 area.
Analysis by: forexpros.com written by Jason Alan Jankovsky
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