Daily Analysis – 21/04/2009

Today’s US Dollar Trading
•    USD tries to extend gains and fails
•    BOC cuts rates adding to whipsaw
•    Traders note stops in range adding to downside for the USD

Overnight Preview

•    Look for more two-way action
•    USD likely to remain under pressure into New York open

Looking Ahead to Wednesday

All times Eastern (-5 GMT)
•    9:00am USD Treasury Sec Geithner Speaks
•    10:00am USD HPI m/m
•    10:30am USD Crude Oil Inventories


The USD ends mixed today after reaching critical S/R numbers after the open and ahead of the London fix. The BOC announced a 25 BP cut in interest rates lifting the USD/CAD sharply higher as stops over the 1.2400 area fired off topping the rate at 1.2509 before cooler heads prevailed. The rate fell back as late buyers were disappointed finding sell-stops in-range bringing the rate back under the 1.2400 handle eventually making a new low on the day at 1.2324; traders now feel the rate has completed a retracement against the recent weakness and with an inverted hammer formation on the daily charts more losses are likely. USD/JPY continued to find strength as the US equities markets held gains on the day finding light stops above the 98.50 area for high prints late in the day at 98.87 as new buyers went with momentum as the rate approached the 200 day MA. Failure to close over the 200 day MA likely will disappoint buyers overnight and a lower day is likely as the bounce lacked enthusiasm. USD/CHF failed to extend gains on USD strength in other pairs and with the firm close in both GBP and EURO the Swissy is likely to advance into the end of the week; high prints at 1.1721 overnight went unchallenged in New York and the rate is holding the 1.1680 area making for a technical inside-range day; lows at 1.1635 missed stops said to be resting around the 1.1610/20 area. GBP rallied to clear close-in stops above the 1.4620 area likely set by late shorts for a high print at 1.4710 before offers capped the move. Despite intraday volatility the rate ends New York firm around the 1.4660 area suggesting that the dip under the 100 day MA attracted short-covering and new buying. Traders note that more stops are likely building over the 1.4710 area from sellers suggesting another leg higher is coming. EURO failed to extend lows holding to an inside-range day as well; high prints at 1.2995 were marginal new highs after the fix but sellers capped the move ahead of offers said to be around the 1.300/20 area. A point of indecision in EURO likely means that upside pressure from other pairs will help keep EURO underpinned near-term. In my view, the failure of the USD to advance after today’s volatility suggests that the top is continuing to form and likely the Greenback will end this week marginally lower against most pairs. I think the reversal in USD/CAD speaks highly to the underlying weakness of the USD and with better overseas fundamentals combined with potential liquidation by China of US denominated assets it will be difficult for USD traders to justify higher prices. Flight-to-Quality buying appears to be ending and when higher priced USD comes into the market the selling pressure will be enormous as traders attempt to protect against a slide in the USD. Look for the Greenback to remain two-way overnight but to remain under pressure.


Resistance 3:  1.4820
Resistance 2:  1.4780
Resistance 1:  1.4720/30
Latest New York: 1.4662
Support 1:  1.4500
Support 2:  1.4440/50
Support 3:  1.4400


Rate extends briefly into the 1.4400 handle and rallies out as shorts cover; stops over the 1.4620 area are large lifting the rate to new highs. Holding firm into the close more upside is likely overnight. Stops said to be building above the 1.4720 area after rate clears close-in stops. Tests of the psychological 1.5000 area now complete with the pullback likely about over. Rate likely to find buyers on any dip to the 1.4500 area as this was the breakout area. Rate is still holding the 100 day MA nicely and aggressive traders can look to buy dips. Traders note support is likely firm above the 1.4650 area now; the shorts have lost control of the market above the 1.4440 area now; traders report stops in-range adding for two-way action. Test of further lows likely to encourage a round of short-covering.   

Data due Wednesday: All times EASTERN (-5 GMT)
4:30am GBP Claimant Count Change
4:30am GBP MPC Meeting Minutes
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Public Sector Net Borrowing
4:30am GBP Prelim M4 Money Supply m/m
4:30am GBP Unemployment Rate
7:30am GBP Annual Budget Release  

Resistance 3:  1.3120
Resistance 2:  1.3080
Resistance 1:  1.3020/30
Latest New York:  1.2936
Support 1:  1.2880
Support 2:  1.2850
Support 3:  1.2820


Rate has inside-range day so far failing to extend to a new low on follow-on selling overnight; rate reaches to tech support around 1.2880 but traders say conditions are still on the thin side. Rate has two-way action into the lows suggesting short-term traders and profit-taking by the shorts. Support at or around the 50 day MA now being tested; the 50 day MA is next level needed to hold for the bulls to feel comfortable this week. Need a rally back over within 72 hours for the drop to be considered a correction and not a breakout. Rate likely has stops building in both directions; overhead resistance likely drops to the 1.3080 area; Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view.  

Data due Wednesday: All times EASTERN (-5 GMT)

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

Analysis by: – Written by Jason Alan Jankovsky
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