Today’s US Dollar Trading
• USD holds gains but flows light
• S/R holds as expected
• Speculation that the Fed will not move rates capping the USD
Overnight Preview
• Consolidation likely
• Two-way action with a downside bias
Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 9:00am USD National HPI Composite-20
• 10:00am USD Consumer Confidence
• 10:00am USD House Price Index m/m
• 10:00am USD Richmond Fed Index
Summary
The USD is firmer but falling off the highs for the day as the volumes are drying up into the New York close. Traders note that across the board the USD remained inside established ranges to start the week and due to the two-way nature of today’s action most traders expect more consolidation. Volumes got really light after the London fix most desks say and it is likely that traders don’t want to force positions ahead of the two-day FOMC meeting which starts tomorrow. Analysts are almost unanimous that the Fed will not move rates on Wednesday but are divided as to the significance of the statement. Most are expecting Bernanke to “talk tough” but no one expects the Fed to do anything for the next two or three FOMC meetings. In response to poor European news overnight the EURO and GBP both fell back to near-term support but rallied off those lows after the London fix this morning and are now at their highs for the New York session into the close. EURO has regained the 1.5520 area after dropping into the 1.5460/70 area on light volume this morning. Traders expect EURO to remain two-way through the week with technical trading likely; most analysts say the rate is “fairly” pricing in a 25 BP hike by the ECB on Jul 3rd. In my view, the FOMC is the key to the trade this week as no move at all will work favorably for the EURO. USD/JPY continued to hold gains but was unable to attract any serious buying at the high prints of 108.07; stops rumored to be above the 108.10 area are out of range today. Traders expect the rate to weaken near-term as the technical picture favors at least a test of the 107.00 handle this week. In my view, the rate is due for a sharp sell-off as all these longs must be getting nervous now that the rate has failed at the quarterly highs several times. Look for the USD/JPY to rotate lower overnight and test the south end of the range the next 24 hours. Swissy is also failing at key resistance, the 1.0480 area. Offers from late longs appear to be active as no stops were reported above the 1.0410/20 area only active buying. Now that those longs are under threat expect a pullback into the 1.03 handle soon. Should be a quiet night ahead of US data tomorrow; don’t expect any surprises.
USD/JPY Daily
Resistance 3: 108.80
Resistance 2: 108.50
Resistance 1: 108.00/10
Latest New York: 107.81
Support 1: 107.20/30
Support 2: 107.00
Support 3: 106.80
Comments
Rate grinding sideways to higher overnight; volumes lighter and upside resistance is firm at 108.00 area. Failure to close above the 108.00 handle Monday a good sign rate is ready to break back to the lows looking for stops under the 107.10/107.00 area. Exponential reversal signal still valid, rate is two-way but weaker each day. If short—let it work. If today’s rally fails under the 108.00 handle look for a drop into stops under the 107.00/10 area the next 24 hours. Look to add if rate can hit the stops in the 107.00 area near-term. Some topping seen; expect volatility. Bids appear solid but so do offers; exporters likely on the offer all the way to the highs overnight and active the past several days. USD likely not this strong but more benefiting from Yen weakness. Stops likely rolled up under the 107.00 area for today so if a break happens—look for a drop to the 106.00 handle fairly quickly.
Data due Tuesday: All times EASTERN (-5 GMT)
7:50pm JPY Trade Balance
7:50pm JPY CSPI
USD/CHF Daily
Resistance 3: 1.0520
Resistance 2: 1.0480
Resistance 1: 1.0450/60
Latest New York: 1.0457
Support 1: 1.0320/30
Support 2: 1.0300
Support 3: 1.0270/80
Comments
Rate rallies back to resistance, fails at 1.0480 area as expected. Rate stuck in a range but still looking to support/resistance hovering around the 100 bar MA. Overhead resistance now at the 1.0480 area. Rate continues to rotate up to and fail at the 100 bar MA area; a sell off to end the day today would be ideal to set-up for further losses during the week. Buyers appear to be technical traders and expect some momentum accounts on the bid soon. No doubt some bids are profit-taking from the shorts but that won’t last in my view. In my view, the rate needs to be sold on any strength. Hourly sell signals also suggest that the rate is ready to rotate lower again. Look for two-way action overnight into Tuesday.
Data due Tuesday: All times EASTERN (-5 GMT)
4:00am CHF Consumption Indicator
Analysis by: Forexpros.com written by Jason Alan Jankovsky
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