Today’s US Dollar Trading
• USD reverses from highs overnight, ends mixed
• US data neutral to favorable but no follow-through
• Volumes lighter as traders are confused
Overnight Preview
• Traders expect two-way action with the majors to consolidate
• Likely the USD will remain technical until NFP on Friday
Looking Ahead to Thursday
All times EASTERN (-5 GMT)
• 8:30am USD Unemployment Claims 374K
• 10:35am USD Natural Gas Storage
• 12:00pm USD Philadelphia Fed President Plosser Speaks
Summary
Despite neutral-to-better US data today the USD was unable to extend gains from yesterday and ended the day mixed. Better against GBP, the Greenback pushed Cable into early lows at 1.9424 after clearing stops under the 1.9500 handle in Europe. Traders note that cross-spreaders are on the offer and most of the action was related to non-USD pairs. Although the rate was on the defense most of the day traders report nice bids from sovereign names supported on every dip. Offers are said to be building around the 1.5480 area with stops layered above suggesting that late shorts are playing a very tight stop. EURO fell back a bit but was supported as well on dips; low prints at 1.5418 were never challenged and as oil prices rose and fell so did EURO making for whippy trade. Traders note that Russian names were active matching other calls for sovereign interest on the lows. Analysts remind that the 1.5500 area likely to offer at least one pullback if the rate rallies but stops are just above suggesting late shorts are running tight risk control similar to GBP. USD/JPY had a tight two-way range today but still inside yesterday; finishing back above the 105.00 handle at around the 105.15 area; large bids said to be under the rate around the 104.40 area but lows at 104.52 left those unchallenged. Traders note that volumes were light on the day and that down action appears to have some teeth to it but caution that the stops are still higher; roughly the 105.50/60 area. Could have some whipsaw also overnight. Swissy was firm around the 1.0420 area to end the day after bids were uncovered in the 1.0350/60 area this morning. Positive ADP data lifted the USD off of the lows but offers above the 1.0440 area contained the rally. Traders expect overhead resistance to hold but the rally could extend to 1.0520 area near-term. In my view, the USD went nowhere today and with good news out of the way it is likely that NFP will disappoint. How the market trades the next 24 hours is important to the set-up; I am looking for quiet two-way action to end in USD weakness by this time tomorrow. I don’t think the Greenback has what it takes to lift into new weekly highs when facing down a serious piece of data later this week. Should be a quiet overnight session;
GBP/USD Daily
Resistance 3: 1.9720
Resistance 2: 1.9680
Resistance 1: 1.9630/40
Latest New York: 1.9545
Support 1: 1.9520/30
Support 2: 1.9500
Support 3: 1.9480
Comments
After all was said and done today, the GBP traded mostly sideways on light volumes. Dips were bought by large names traders say. Stops drive rate into the lows but bids and rumors of sovereign buys hold rate at the 1.9450/60 area on light volume to start New York. Trading in sympathy with EURO continues and EURO strength likely to spillover eventually into cable. Stopped out of longs overnight; OK to look at the long side again as support may be forming at current levels; might want to wait 24 hours. Lots of potential for day traders the next 24-48 hours as the rate is likely to stay range bound ahead of US data later in the week. Continue to expect a lot of sympathy trade with EURO; the cross-spreaders are having a field day with the Sterling crosses and I think the GBP may track EURO near-term. Expect continued whipsaw around US news this morning. Bernanke comments a total head-fake in my view.
Data due Thursday: All times EASTERN (-5 GMT)
Tentative GBP Halifax House Price Index m/m -1.1%
Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate
USD/JPY Daily
Resistance 3: 105.80
Resistance 2: 105.50/60
Resistance 1: 105.30
Latest New York: 105.27
Support 1: 104.40/50
Support 2: 104.00/10
Support 3: 103.70/80
Comments
Rate is stuck in-range; no follow-through either way but longs getting nervous I think. Expect more selling on overnight strength. Hold shorts—nothing to do but wait as the bulls run for the exits. Model accounts on the bid last night a good sign the rate will fall back. Expect lots of two-way action and the rate is likely to cover a lot of the same ground twice the next 24-48 hours. This week’s data may be largely ignored until NFP out later in the week. Longs likely rolling stops up underneath close-in so expect volatility later today.
Data due Thursday: All times EASTERN (-5 GMT)