Today’s US Dollar Trading
•USD rallies ahead of News, lacks follow-through
•Majors on S/R volumes low
•Sovereign names seen selling USD
Overnight Preview
•A round of book-squaring likely
Looking Ahead to Thursday
All times EASTERN (-5 GMT)
•8:30am USD Empire State Business Conditions Index 0.1
•8:30am USD Unemployment Claims 370K
•9:00am USD TIC Net Long-Term Transactions 63.6B
•9:15am USD Capacity Utilization Rate 80.1%
•9:15am USD Industrial Production m/m -0.3%
•9:30am USD Fed Chairman Bernanke Speaks
•10:00am USD Philadelphia Fed Manufacturing Index -19.0
•1:00pm USD NAHB Housing Market Index 20
•7:00pm USD Fed Governor Mishkin Speaks
Summary
The USD rallied today after a slow start again in Asia helped by better equities pricing and model/momentum accounts buying; traders note that volumes were not impressive and the majors all held significant S/R. Initially two-way in Asia the Greenback went one-way on stops and aggressive buying near the start of European trade as reserve managers bought USD in the morning only to see the majors reverse after news; the USD sold off on the BOE inflation report but then recovered reversing ahead of US data. Today’s CPI data was softer-than-expected and the USD initially broke lower on the day but held existing overnight ranges. Settling back after the London Fix the USD continued to drift in quieter range-bound action with little news driving any of the pairs. Cable continued to hold the 1.9450 area that has held stops in both directions the past 72 hours; low prints at 1.9361 were bought by cross-spreaders and semi-official names traders say. Upside limited to the 1.9487 high but the rate has solid bids at the 1.9400 handle and slightly above. Traders are looking for the rate to hold the 2008 lows and a solid bounce is expected by the end of the week. EURO no less aggressive to the upside but continues to languish under the 1.5500 handle as traders say offers appear thick on the approach. Highs at 1.5487 were met with Swiss private bank sales some traders report; same names seen on the bid under the 1.5400 handle recently. Traders note sovereign demand in EURO at around the 1.5430 area and also in USD/JPY on the buy side. USD/JPY rallied into stops above the 104.80 area and again at 105.20 area for a high print at 105.46 but the rate is really struggling to hold gains and traders report volumes are light and flows patchy; heavy offers said to be around the 105.50 area and higher suggesting the rate is at or near a top. Swissy also encountering strong resistance under the 1.0600 handle; highs at 1.0601 were more symbolic than anything else. Traders are looking for the USD to pull back from here but the lack of selling interest is a concern for the shorts. In my view, the USD needed to give back some of these gains right away rather than hold firm as it has. Tomorrow is another day of important news so watch for book squaring overnight to temper the USD advance. A long-liquidation break is coming and when it does the Greenback could break sharply very quickly.
USD/JPY
Resistance 3: 106.00
Resistance 2: 105.80
Resistance 1: 105.50
Latest New York: 105.21
Support 1: 104.60
Support 2: 104.20/30
Support 3: 103.80
Comments
Rate makes one more high into resistance generating a strong sell signal. Look for the rate to fall on the news but intraday volatility likely. Double-top remains strong sell signal suggests resistance area is getting thicker. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; look for close-in stops under the 104.50 area today. Continue to expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally through Tuesday but fall harder into mid week; likely under the 103.00 handle. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Stops could be in size at the 102.50/80 area. Resistance at 105.50 area remains significant now and rallies should be sold. Traders looking for a struggle to get over the 105.50 area.
Data due Thursday: All times EASTERN (-5 GMT)
7:50pm JPY GDP q/q 0.6%
7:50pm JPY GDP Deflator y/y-1.5%
USD/CHF Daily
Resistance 3: 1.0700
Resistance 2: 1.0650
Resistance 1: 1.0600/10
Latest New York: 1.0552
Support 1: 1.0500/10
Support 2: 1.0450/60
Support 3: 1.0400/10
Comments
Rally overnight may be expected in sympathy with YEN but upside is labored; stalling at the 1.0600 handle significant. No follow-through after news this morning is a signal the top may be in. Pullback needed to confirm strong sell signal generated overnight. Monday’s failure above the 1.0500 handle still significant in my view. Likely this rally overnight is model and momentum accounts on the buy side. Upside is limited and the volumes aren’t that great so far today again. Be nimble though as a break below 1.0380 likely to draw aggressive selling. Rate continues to attract dip buying; next dip will likely be bought around 1.0400 area; but last three dips have failed to create significant rally. Close under the 1.0400 area sets up a loss to 1.0250 near-term.
Data due Thursday: All times EASTERN (-5 GMT)
1:45am CHF Consumer Climate
5:00am CHF SNB Board Member Jordan Speaks
Analysis by: Forexpros.com written by Jason Alan Jankovsky
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