Today’s US Dollar Trading
• USD has range-bound trade despite news
• CPI as expected, Housing data worse
• EURO scores a lifetime high
• Look for the USD to consolidate with weaker tone
• Book-squaring ahead of US data tomorrow likely
• 9:00 AM CDT Thursday Philly Fed forecast -14.0
The USD was under pressure most of the forex trading day today after a quiet two-way start in Asia that saw the highs for the day. Remaining inside established ranges on the highs, the Greenback continued to probe for serious buyers but found none as today’s inflation data and housing data disappointed USD bulls quickly. Although benign, the CPI numbers suggest that producers are holding back some of the pain that the inflation pressures seem to be giving the economy at this time; PPI yesterday showed that inflation was certainly being seen at the manufacturing level while today’s “as expected” CPI numbers show the cost is not being passed to the consumer very quickly. That leaves a lot of room for the Fed to stimulate growth and most analysts are upping the forecasts to include a 25 BP rate cut at the April 30 FOMC meeting. In my view, the lack of hard downward pressure on the USD despite the bad housing data suggests that the jury is still out as to the extent of the potential for a housing rebound. Still declining the housing starts fell 11.9% while permits continued to lag. Traders took the opportunity to sell USD across the board but the lack of downside follow-through argues for continued two-way trade. The one exception was EURO which scored another lifetime high at 1.5980 and ends NY near the highs suggesting more upside on the way. Aggressive traders can look for the 1.60 area of psychological “big-figure” resistance to offer a selling opportunity. Likely to see a “first through the even” scenario and I suggest a short from above the 1.6000 handle. Cable rallied along with EURO but found resistance at the 1.9800 handle; high prints at 1.9809 before falling back with the rate dropping under the 1.9720/30 area “sell-zone” on the close. More selling expected in GBP so hold shorts if you have them. USD/JPY continued to trade two-way with high prints at 101.94 in Asia going unchallenged in NY; lows at 100.81 also unchallenged leaving most of the day mid-range. Firmer stocks were a big help for the rate and traders expect offers between 101.80 and 102.00/10 to cap further gains should the Nikkei open firmer. In my view, a sideways selling opportunity today; look for the USD to suffer more tomorrow.
Current Price: 1.9710
Although reversal pattern is active for the bounce off the 1.9600 area the long selling wick is more significant as the stops above the 1.9720/30 area “sell-zone” failed to include fresh buying. Close under the 1.9700 handle ideal but with a few minutes left to run a close under 1.9720 is still technically viable for a “head-fake” up day. Look for stops to build under the 1.9680 area in range for late longs today adding to volatility. 50 bar MA offered resistance today and as long as rate hold below; stay short.
Current Price: 101.66
Overhead resistance continues to remain thick with lots of offers reported between 101.80 and 102.00/20 area (?) suggesting that the rate will remain range-bound at least through Philly Fed tomorrow. Look for stops above the 102.30 area to build as well as under the 100.50 area with more at 100.00/10. If rate can hold under the 101.50 are by Friday’s trade I think a downside test of support is in the works for next week. Stops likely large under the trend line for the small up channel.
Analysis by: forexpros.com written by Jason Alan Jankovsky
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