Today’s US Dollar Trading
• USD again on the defense
• US data below expectations, helped drive USD lower
• Some signs of reversal developing
• USD likely to remain under pressure as it consolidates
• Eurozone GDP out overnight
• 11:00 AM CST Tuesday Auto and Truck sales, no factor
• Wednesday ADP private payrolls, ISM Services, Fed’s Beige Book
• Thursday Pending Homes Sales
The USD continued to consolidate in two-way technical trade today after early strength gave way to profit taking and residual buying in the majors. Although finishing the day technically mixed, the USD remains under threat despite a severe over-sold reading across the board. Traders note that the Greenback has remained mostly inside Friday’s range the past 24 trading hours with the exception of EURO which posted another record high against the USD. Traders are still unsure what is causing the continued strength in EURO today and many desks report choppy trade and thin order books suggesting that the EURO is really reaching at these high levels. High prints in the rate came after the release of poor ISM index data; high prints at 1.5277. Ism out at 48.3 was below expectations and prompted a wave of USD selling but that seemed to be just enough to encourage a bout of profit-taking and short-covering as most of the pairs sank into afternoon trade. Despite a weaker equities market the Swissy and USD/JPY lifted off their lows to post gains in excess of a full handle higher off the lows. EURO sank back under the 1.5200 handle and targeted lows on the day at 1.5156 during New York trade suggesting a potential reversal is in the works. GBP held firm but finished lower due largely to cross-spreaders liquidating near record levels in the GBP crosses. EURO continued to weaken into the close but held at the 1.4180/90 area to end the day. USD/JPY had a low print at 102.60 for a three-year low and only about one handle from the 12 year low suggesting the USD/JPY has found near-term support as the rate made highs on the day shortly after printing the low; highs at 103.72. In my view, the severely oversold USD is showing signs of a technical bottom after today’s trade. If this week develops into a corrective week then the potential is good that the lows for the week are in. Aggressive traders can look to buy USD across the board the next 24 hours as a technical correction may be underway finally.
Current Price: 103.13
Rate wants to bottom near-term as volumes dropped a bit into the low prints after the sell-off all week last week. Stops were in range this morning around the 103.40/50 area traders say with more likely at the 104.00 and 104.20 area. Offers likely thick ahead of stops but the quality of the selling is the question. Look for model and momentum accounts to be on the offer the next 24-48 hours setting up the rally off the lows to correct the oversold condition.
Current Price: 1.5193
Bids said to extend under the 1.5150 area in waves with potential stops mixed in down to the 1.5080 area or so traders say; should those bids get pulled the next 24-48 hours the rate is setting up for a head-fake reversal as I don’t think the market is real excited about taking on more longs. Traders still unsure about what is driving the rally but many desks report stops almost all the time above and close-in. Look for volatility to get big on a liquidating break; hook reversal still valid from yesterday.
Analysis by: Jason Alan Jankovsky in Association with The Forex Edge
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