Daily Analysis

Today’s US Dollar Trading
•    USD lower in Asia, firms into New York and holds
•    New highs in CAD but USD ends mixed
•    Traders note solid bids in some pairs on the dip

Overnight Preview

•    Look for more two-way technical action
•    USD is due for a correction

Looking Ahead to Tuesday

All times Eastern (-4 GMT)
•    7:30am USD Fed Chairman Bernanke Speaks
•    9:00am USD IBD/TIPP Economic Optimism
•    9:00am USD Wholesale Inventories m/m

The USD is holding gains into the end of New York trading today after solid two-way action overnight put the Greenback on the offensive into this morning. Rising to new weekly highs against GBP and yearly highs against CAD; other major pairs remain range-bound and inside-range. Traders note that cross-spreaders for GBP pairs kept Sterling on the defense all day putting in a low print at 1.3741 before stabilizing back on the 1.3800 handle for most of the day. Investor confidence remains weak to start the week as equities remained under pressure and traders note some flight to quality buying of USD was seen but remind that the Greenback is over-bought in the near-term. With high bullish consensus among traders it is hard to see the USD continuing to climb without some sort of a correction and traders note that in most pairs a “buy the dip” mentality is in play. EURO tracked GBP lower for low prints at 1.2555 before rallying back to the 1.2660 area and edges lower to the 1.2620/30 area into the end of day; overnight high prints at 1.2728 remained unchallenged in New York. USD/CHF failed again at the 1.1680 area; high print at 1.1683 before retreating under the 1.1600 handle but lows at 1.1533 remain unchallenged on the day making the USD/CHF lower and inside range on the day near the end of day.  Traders continue to remain fearful of possible intervention by the SNB but most traders see that as remote. USD/CAD was the big winner on the day rallying through stops over the 1.3000 area for a high print of 1.3066 before backing off a full handle later in the day; the rate is attracting a sizable amount of flight-to-quality buyers but traders remind that the multi-year highs are going to be a tempting area for sellers and how the rate performs to end the week may set the stage for a near-term top. Canadian payrolls due Friday may provide some ending fireworks to the week and if the rate can’t close above the 1.3000 handle the next day or two a long-liquidation break may be brewing. USD/JPY followed USD strength elsewhere and rose to a high print in New York at 99.20 before dropping back to the 98.70 area; traders note a lot of exporter selling was absorbed above the 98.50 area and many are looking for a test of the weekly highs around the 99.60 area. Above there are likely stops but the big number will be the 200 day MA around the 100.00 area. In my view, the Greenback is continuing to show signs of a top in my view; overwhelming bullish sentiment but a failure to make highs across the board make for a suspect rally today. Look for more two-ay technical action overnight as the calendar remains thin for news. Aggressive traders can look to the sell side of USD the next 24 hours or so.


Resistance 3:  1.4440
Resistance 2:  1.4380
Resistance 1:  1.4300/10
Latest New York: 1.3780
Support 1:  1.3740/50
Support 2:  1.3700
Support 3:  1.3650


Rate follows-on lower on stops under the 1.4050 area in size, cross-spreaders selling the GBP side of the spreads. Buy point around 1.4000 area in my view. Reversal off weekly highs a negative technical; is it a bear trap? Likely an upside rally is still in the works but the rate needs to hold the 1.4000 area with some confidence early this week. Middle East names likely on the bid on this dip but no confirm yet. 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 initial support now at 1.3900 in play. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom.  Short squeeze may be on hold.
Data due Tuesday: All times EASTERN (-4 GMT)
4:30am GBP Manufacturing Production m/m
4:30am GBP Industrial Production m/m
7:01pm GBP NIESR GDP Estimate


Resistance 3:  1.2780
Resistance 2:  1.2750
Resistance 1:  1.2720
Latest New York:  1.2600
Support 1:  1.2550/60
Support 2:  1.2480
Support 3:  1.2450


Rate follows GBP in two-way action, holding support now at 1.2550 area once again. Aggressive traders can add to open longs on this dip. Cross-spreaders supporting rate as GBP drops. Stops building on both sides as the rate tests for stops on the downside first. Upside stops likely building in the 1.2630/50 area again, overhead resistance at 1.2720 area now with stops likely the other side. Key 1.3030 area likely next; failure to hold 1.2900 likely going to be the test for the bulls this week. 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. 100 day MA falling to key resistance area of 1.3030 area by next week likely to add to overhead resistance. Technical levels around the 1.2920/50 area now likely to offer resistance so expect two-way action and consolidation underneath.  
Data due Tuesday: All times EASTERN (-4 GMT)
2:00am EUR German Trade Balance
2:00am EUR German Final CPI m/m
2:45am EUR French Industrial Production m/m
2:45am EUR French Gov Budget Balance
2:45am EUR French Trade Balance
5:00am EUR PPI m/m

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

Forex Analysis by – Written by Jason Alan Jankovsky

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