Today’s US Dollar Trading
• USD gives back Tuesday’s gains
• Volumes lighter but sentiment relentless
• EURO scores another new high
Overnight Preview
• Traders expect two-way action
• Likely to have downward bias continue
Looking Ahead
• 7:30 AM CDT Friday CPI forecast +0.3%, core 0.2%
Summary
The USD took it on the chin again today giving back all of yesterday’s hard-won gains and breaking to new lows against the EURO late in the session. Traders note that although the price action was two-way and seemed to be technical in nature, the volumes were lighter and stops did most of the work. Most of the chatter was concerned with who was on what side of the stops desks report and there seemed no shortage of people selling into the highs across the board; but it was not enough to overwhelm the residual bids. All the major pairs started on the defense in Asia but where quickly reversed by Middle-Eastern demand for EURO and Cable traders say. Most of the action was fairly subdued until the start of European trade when light stops were elected in EURO and GBP. Cable rallied along with EURO as stops were elected in layers; noticeably absent was the usual suspects on the Yen crosses as a technical correction was expected after the Yen’s reversal yesterday. Cable continued to climb into the 2.0200 handle by the start of New York following EURO into a high print at 1.5493 in early New York. After a brief selloff the rates got down to wrecking balance sheets as first a sharp rally followed by a sharp break followed by a sharp rally happened up to the London fix; then it was high after high washing out any selling interest into the end of New York. High prints in EURO at 1.5560 and 2.0280 in GBP. USD/JPY made a show under the 102.00 handle for a low print at 101.67 but not before bids tried to lift the pair on each break from 102.50 all the way down to 101.80; traders note that both bulls and bears are thoroughly confused at this point and liquidation was seen from both sides. In my view, the lack of follow-through selling in the majors after such a nice head-start on Tuesday underscores the euphoric nature of trade at this point. In my view, traders need to be flat and wait for more clues before switching sides or again looking for the highs. No matter how you slice it, when price action begins to create more questions than it answers it is best to be sidelined until you get some answers. Until you get better clues to price direction instead of this whipsaw, stay flat and enjoy the madness.
EURO/USD Daily
R3: ?
R2: ?
R1: ?
Current Price: 1.5549
S1: 1.5520
S2: 1.5480
S3: 1.5450
Rate continues to give the bears no quarter and powers to three separate attempts at highs attracting sellers all the way. Rhetoric from ECB governors today did nothing to help the bullish momentum. Lots of reasons to stand aside and in my view it might be a good move to flatten out before switching to the long side or looking for a top. This market will not act rationally at this point and it is WAY overdue for a correction. Look for more upside to the “Oh my god!” level.
USD/JPY Daily
R3: 102.70/80
R2: 102.30/40
R1: 102.00
Current Price: 101.76
S1: 101.40/50
S2: 101.20
S3: ?
Pair retraces buying pressure from yesterday completely negating upside potential, two-bar continuation pattern likely means further declines; no chance of a rally without a change in sentiment or a “surprise” in my view. Bulls completely demoralized I think and they will likely not be looking to buy without a strong reversal pattern. Stops under the ten-year lows likely to be moved up to the 101.50 area as a break looks inevitable. No bottom in sight and a test of the 100.00 level looks next.