Forexpros Daily Analysis

Overnight Asia/Europe
• USD two-way
• Opens New York better
• Year-end drives Tokyo trade

Today’s Economic Reports

• 8:45 AM CDT Chicago PMI forecast 46.7

Looking Ahead

• 9:00 AM CDT Tuesday ISM Index forecast 48.2
• 7:00 PM CDT Tuesday Japan Tankan report

The USD is firmer to start New York this morning after opening on the weak side in Asia. USD/JPY rallied briefly as year-end needs favored short-covering and book-squaring but once the year-end buying was over the Greenback feel back to unchanged; the other majors were firmer into the start of European trading. Traders report volumes were light but it was still enough to help the USD extend its range against GBP; Cable falling back to the 50 bar MA at 1.9812 low print on the back of disappointing UK data. Trader’s note that the Sterling crosses were under pressure overnight and that contributed to the weakness in GBP to start the week. Many traders also note that the sentiment is turning to “sell rallies” in Cable suggesting that the rate will suffer more losses ahead. EURO is two way inside established ranges with the “usual suspects” on the bid/offer. Traders note that hawkish rhetoric the past few days has emboldened the bulls even with the rate sitting within a short distance from all-time highs. Sellers were at the 1.5830 area again with a high print to start the week at 1.5836 coming after a cross-driven rally from the Asian lows at 1.5758; stops are likely building in the 1.5850 area and ahead of the previous lifetime high at 1.5880 area. Look for a massive rally to the 1.60 handle if stops above the 1.5920/30 area are triggered; in my view the rate is poised for 1.6100 on an extended technical play but that would be the place to short the rate. Aggressive traders can sell EURO on a rally into new highs. For the most part the USD is trading sideways with a slightly firmer tone to start Monday but I think that caution is advised on the long side. I don’t think the Greenback is recovering just yet; I think there is simply a lack of selling. Today’s Chicago PMI data will likely be USD negative and the USD could fall back from the firm open. This week’s data is also expected to be weak so I would be a cautious buyer of USD on the break into the recent lows if we get them. I think the USD is trying to bottom in here and that when it does it will make the turn. In the meantime, expect two-way action and stops on both sides to get triggered over the next 72 hours.


R3:  1.9980
R2:  1.9930/40
R1:  1.9880
Current Price: 1.9845
S1:  1.9810/20
S2:  1.9780
S3:  1.9750

Rate finds some support as expected at the 50 bar MA; look for a technical bounce the next 48 hours but as long as the highs remain under the 1.9950 area on a closing basis the shorts are gaining control. Strong sell signal on the daily will need a day or two to confirm so sells strength into the 1.9980 area in my view. Close under the 50 bar MA argues for further declines and large stops likely under the 1.9780 area; big money traders likely to work with “stop close only” orders under the 50 bar MA.


R3:  100.80
R2:  100.50
R1:  100.20/30
Current Price: 99.57
S1:  99.10/20
S2:  98.50/60
S3:  98.00

Rate continues to consolidate and range-trade within established S/R; rate could be coiling for a sharp move in either direction but the bias is downward in my view. Look for stops above the market to be thicker at 100.50 area and below the market at 98.50 area; I think the bears are willing to cut and run on any strength and the early bulls will bail on any weakness, both sides are nervous I think. Close over the 100.00 area argues for upside break; close under 99.10 for downside.

Analysis by: written by Jason Alan Jankovsky

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