Today’s US Dollar Trading
• NY Fed index weaker, housing data flat
• Stops in range driving some trade
• Likely some profit taking seen by USD shorts Overnight Preview
• Look for more two-way action
• USD to have a weaker tone next 24 hours
Looking Ahead to Tuesday
All times Eastern (-4 GMT)
• 8:30am USD Building Permits
• 8:30am USD PPI m/m
• 8:30am USD Core PPI m/m
• 8:30am USD Housing Starts
Summary
The USD ended the New York session lower but off early weakness as two-way technical trade dominated after US news this morning. A weaker NY Man. Index was offset by flat housing data today helping to keep a bid tone to equities lifting the major indices to key resistance during the day; USD traders sold the Greenback as risk-aversion mitigated a bit allowing the majors to hold moderate gains into the end of day. Traders note stops in-range in most pairs as profit-taking from recently set USD shorts lifted the USD off lows but sentiment remains corrective as the DX fell to critical support around the 86.50 area before bouncing; late longs likely on the bid as the DX reached near the 50 day MA in light trade. The result was a pullback in the major pairs but across the board the USD remained under pressure. GBP dropped off from overnight highs at 1.4232 to trade the 1.4080 area leaving a bit of a sell wick on the daily charts; cross-spreaders for GBP pairs were aggressively buying the other side helping the EURO as EURO-Sterling returned to hold the .9200 handle. EURO high prints at 1.3072 as model accounts were seen on the bid over 1.3000 area last night but the rate has dropped to the 1.2980 area into the close suggesting some profit-taking by the recent longs. Key support is seen near the 1.2880 area and traders noted stops under the 1.3030 area intraday adding to some of the volatility. Should the rate fall back a bit underlying tone is firm some desks report suggesting that a “buy the dip” mentality may be in play. USD/JPY found light stops in-range to the 95.66 high prints but the rate retreated under the 98.00 handle briefly as exporters remained on the offer despite bids from large names and general USD firmness in this pair. Ending the day around 98.20 area will likely encourage more bids overnight but traders warn that a drop in equities the next few days likely will pressure the USD/JPY near-term. If the exporters are still willing to sell strength the upside may be tough going in that pair. USD/CHF ends the day around 1.1850 area after an early dip to the 1.1800/10 area; low prints at 1.1804 still above technical support said to be around 1.1780 area. Stops are likely in size under the 1.1780 area as well and if the rate can’t hold the 1.1900 handle near-term a long-liquidating break is probably in the works. Traders note that bids were thinning out above the 1.1880 area overnight suggesting that buyers are likely expecting a pullback before making a try for a new long. USD/CAD regained the 1.2700 handle but only briefly; intraday high prints around the 1.2720 area were sold and the rate returned to the 1.2650 area quickly suggesting offers are waiting on strength to start the week. Ending near 1.2680 is around tech support but traders warn of stops under the 1.2620 area. In my view, the focus for USD strength appears to be shifting away from flight-to-quality buying the last few sessions. With firmer equities on the board and progress appearing to be made in resolving the economic issues some liquidation is likely being seen. Expect more two-way action the next 24 hours but with a bearish tone for the USD.
GBP/USD Daily
Resistance 3: 1.4350
Resistance 2: 1.4320
Resistance 1: 1.4250
Latest New York: 1.4053
Support 1: 1.3860
Support 2: 1.3780
Support 3: 1.3720
Comments
Rate holds gains and makes new high overnight; stops seen above weekly highs around the 1.4050 area. Tests support on pullback and holds for now. Lows likely remain secure. Reversal off weekly lows a positive technical but the volume needs to come up and I think the shorts have yet to bail as a group. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term but stops are building above and the 1.5000 handle is a big psychological number. 23 year lows are very likely to hold on any break with long-term support at 1.3500 area now in play. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Short squeeze back on the board I think.
Data due Tuesday: All times EASTERN (-4 GMT)
5:30am GBP DCLG HPI y/y
4:10pm GBP BOE Gov King Speaks
EUR/USD Daily
Resistance 3: 1.3100
Resistance 2: 1.3080
Resistance 1: 1.3050
Latest New York: 1.2985
Support 1: 1.2850
Support 2: 1.2720
Support 3: 1.2680
Comments
Rate follows GBP in two-way action, holding support now above the 1.2880 area. Upside stops triggered on the move over 1.2950/60 area with new buying coming in above 1.3000 area. Overhead resistance is thick up to 1.3100 area so a pullback might be in the works. Aggressive traders can liquidate some longs above 1.3000 area and hold base positions. Traders note big names on the buy side on dips overnight; semi-officials buying 1.2900 area. Close above key 1.3030 area needed for further upside until then rallies likely to be sold so expect more two-way action. Bulls are still attempting to find a bottom. Technical levels around the 1.2920/50 area now likely to offer support on further weakness so expect two-way action and consolidation underneath.
Data due Tuesday: All times EASTERN (-4 GMT)
6:00am EUR German ZEW Economic Sentiment
6:00am EUR ZEW Economic Sentiment
3:15pm EUR ECB President Trichet Speaks
Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)
Forex Trading Analysis by: Forexpros.com – Written by Jason Alan Jankovsky
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