Forexpros Daily Analysis

Overnight Asia/Europe
• USD two-sided in technical trade
• Equities weaker pressuring USD/JPY
• Carry trade liquidation seen

Today’s Economic Reports

• 9:00 AM CST ISM Index forecast 49.0

Looking Ahead

• Later in the week: ISM Services, ADP private payrolls, NFP and Housing numbers
• Eurozone GDP Tuesday overnight

The USD starts the week sideways in two-way technical trade for the most part after taking a beating last week; traders note that liquidation of carry trades is helping the USD as non-USD pairs are sold for Yen most notably Sterling-Yen. Traders are selling most major pairs and buying Yen which appears to be liquidation pressures as crosses reach near-all-time highs and a lot of money was made on the move. Some book-squaring is noted also as several fundamentals are due out this week that might create volatility for USD players; beige book is out this week and OPEC is meeting also. All US data due is expected to show continuing contraction in the US economy which is pressuring the USD but some traders remind that a 75 BP interest rate cut by the Fed is fully factored into prices now suggesting that a case of “buy the rumor/sell the fact” may be building momentum as this week’s news may already be completely factored in. Should that be the case a sharp rally may be in store and is likely given the current oversold nature of the USD after last week’s break. Cable is solidly trading the 1.9800 handle; high prints at 1.9894 and lows at 1.9807. Traders note that the rate came on the board in Asia on the defense and found stops close-in at the 1.9820 area; most likely from late longs set on Friday. EURO continues to trade with a buoyant tone but traders note that offers were plentiful above the 1.5200 handle for a high print at 1.5238; stops were close-in at 1.5180 area for a low print at 1.5160. Bids are said to be layered under 1.5150 with stops a risk under the 1.5130 area but with the recent strength in EURO traders expect the downside to be limited. In my view, the EURO is overbought and a correction back to test the 1.4800 area where the breakout started building for the upside would be reasonable to test the tenacity of the bulls. USD/JPY fell to another low to start the week as Yen is bought across the board but the low prints at 102.60 put the rate at multi-year lows; a significant risk for an upside correction. In my view, the USD is severely oversold and euphoria is driving trade. The late USD seller is at risk and I would be looking for the USD to recover into the end of the week.


R3:  104.20
R2:  104.00
R1:  103.50/60
Current Price: 102.96
S1:  102.60
S2:  102.00
S3:  101.50/60

Rate now about 100 points above a 12 year low; significant support seen at the 101.50 area and a short-covering rally is almost a given at that point. Aggressive traders can look to be buyers on further weakness to the low 102.00 handle numbers; a slam-dunk buy in my view on a dip to the 101.50/60 area. Stops a risk above the previous support areas at 103.60 and 104.00; traders note that there is trend-line support at today’s lows. Look for a short-squeeze during the week.

R3:  ?
R2:  ?
R1:  1.5230/40
Current Price:  1.5202
S1:  1.5150/60
S2:  1.5100
S3:  1.5060

Rate has three highs at the 1.5220/30 area suggesting that resistance is forming around the 1.4230/40 area, traders note that the rate appears firm at these numbers but the recent run-up may be out of steam and some desks are resigned to a pullback sooner or later. Buy the dip seems to be the strategy/rumor but the quality of that buying is a concern; lot’s of model/momentum accounts some desks say. Look  for the rate to suffer a sell-off this week.