Daily Analysis

Overnight Asia/Europe
• USD two-sided in range bound trade
• Overnight news thin but important
• BOJ holds rates steady as expected

Today’s Economic Reports

• None of note in the US

Looking Ahead

• 7:30 Am CDT Thursday Balance of Trade – 57.4B
• Friday Michigan Sentiment and G7

The USD is two-way to start New York after a relatively quiet overnight session that saw nothing unusual in the way of news. Starting a bit weaker in Asia the USD followed through briefly from US selling pressure but began to recover to press for highs during European trade. The BOJ held rates steady as expected which saw little initial reaction in the USD/JPY but within an hour or two the rate began to slide off as the Yen gained a bit on the news. No new Governor as of yet and that may be keeping the USD/JPY pair range-bound as the BOJ lacks direction and it is not known if a “hawk” or a “dove” will be appointed next. The Japanese economy is beginning to show signs of weakening and it is reasonable to expect that rates won’t change ahead of the end of the year. USD/JPY lows overnight at 102.16 with highs in Europe at 102.84 (again). Talk of option defense and official sales are limiting the upside this morning traders say. Cable remained inside established ranges for most of the overnight action but managed to probe for stops said to be resting in the 1.9650 area; low prints at 1.9649 but recovered after better-than-expected UK Industrial Production numbers came out. Highs in the rate at 1.9727 are right up against S/R and a failure here opens the door for the 2008 lows in my view. Aggressive traders can add to open shorts at the 1.9700 area if not already yesterday; look for the rate to close under the 1.9600 area on the week after US news tomorrow and Friday. Don’t forget the BOE meets tomorrow and a 25 BP rate cut is expected so some volatility around the news is likely. EURO continues to grind higher between the 1.5680 are and the 1.5750 area; low prints at 1.5682 and high prints at 1.5743 leaving stops on either side of consolidation untouched for now. Eurozone GDP released about as expected but showing a brief dip q/q while remaining at +2.2% overall; EURO had a muted positive response but unable to go anywhere at this point. US action today likely to keep the USD range bound one more day ahead of news due tomorrow; technical trade within expected ranges will likely make for a quiet day. Look for book-squaring at the London fix to provide some volatility.


R3:  1.5800/10
R2:  1.5780
R1:  1.5750
Current Price: 1.5723
S1:  1.5680
S2:  1.5650
S3:  1.5620

Rate continues to remain trapped in near-term pennant formation as the pair is coiling and likely to make a breakout within a few days. Traders note that stops are said to be in-range at 1.5750 and if triggered expect a sharp rise to the 1.5800 area where option defense and private name sales are likely. Stops under the 1.5650 area also in play but dips under the 1.5620 area likely to be bought traders say; potential to remain range-bound today is very high. Day traders may have some opportunity.


R3:  103.20
R2:  103.00
R1:  102.80
Current Price: 102.54
S1:  102.20
S2:  102.00
S3:  101.80

Rate remains range bound while bumping up against resistance for the fourth time in six days suggesting that the rate wants to try for stops above the 103.00 area but unable to vault offers ahead of 102.80; volumes are getting lighter and if the rate continues to coil in this area and fail there is a strong possibility for a free-fall several handle as disappointed longs bail; support at 100.00 area said to be strong. Resistance likely at the 50 bar MA should an upside break happen.

Analysis by: written by Jason Alan Jankovsky

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