Forex Daily Analysis

Today’s USD Trading 

• USD quiet in Asia, firms in Europe
• GBP and EURO rally after rate cut
• Whipsaw in the majors

Today’s Economic Reports
All times EASTERN (-5 GMT)
• 8:15am ADP Private Payrolls, Actual+ 10,000
• 8:30am Advance GDP q/q 0.2%0.6%, Actual +0.6, -0.2%
• 8:30am Advance GDP Price Index q/q 3.0%2.6%
• 8:30am DECI q/q 0.8%0.8%
• 9:45am Chicago PMI 47.548.2 Actual 48.3
• 2:15pm FOMC, actual 25 BP cut

Looking Ahead to Thursday
All times EASTERN (-5 GMT)
• 7:30am Challenger Job Cuts y/y 9.4%
• 8:30am Personal Spending m/m 0.2%0.1%
• 8:30am Core PCE Price Index m/m 0.1%0.1%
• 8:30am Unemployment Claims 363K342K
• 8:30am Personal Income m/m 0.4%0.5%
• 10:00am ISM Manufacturing Index 48.048.6
• 10:00am ISM Manufacturing Prices 83.583.5
• 10:00am Construction Spending m/m -0.8%-0.3%

USD two-way again, GBP rallies back, Fed cuts
As expected the FOMC cut interest rates 25 BP today and changed the wording of the statement suggesting that the Fed is taking a more neutral course in the coming months. Analysts are debating that the Fed would like to see the effect of both the new liquidity windows and the government rebate-stimulus package before weighing in on further rate cuts. The Fed made clear that it is still considering the inflation pressures seen recently and the bottom line to the rate cut is a “wait and see” attitude. In response the USD whipsawed trader’s on the news; initially rising against some pairs and then getting slammed later. Traders note that the rally in GBP as well as EURO are “knee jerk” responses to trade volatility and don’t expect a serious change in trend; most agree the USD “squeezed” weak longs initially. For the record, the GBP rallied on news starting this morning as other US news was not USD friendly but popped higher on stops and short-covering above the 1.9800 handle for a high print at 1.9897 before finding offers at technical resistance around the recent developing down trend. Traders note that cable has been exceptionally volatile the past several weeks and today was no exception; if the rate follows suit the next 24 hours we should see a return to the 1.9600 handle by the end of the week. EURO rallied initially on the news for a high print at 1.5645 and looks set to continue higher but offers in the 1.5650 area and 1.5680 area are said to be getting thicker so this rally off the lows may be a dead-cat bounce. Look for a lack of follow-through overnight. USD/JPY broke under the 104.00 handle in heavy trade for a low print at the 103.68 number at last look; traders note that the rate has had good selling from CTA types and exporters around the 104.60/80 area this morning. USD/CAD and Swissy also taking their lumps but not nearly as aggressively as other pairs; OK to hold open shorts across the board and let the overnight action work for us. Tomorrow is a light day for news so expect a rotation in the USD; especially against GBP.


Resistance 3:  1.9950
Resistance 2:  1.9900/10
Resistance 1:  1.9820/30
Latest New York: 1.9883
Support 1:  1.9820/30
Support 2:  1.9780
Support 3:  1.9750

Other Things to Watch/Open Trades/News

4-30-08 SELL GBP/USD 1.9820 OB Stops@ 1.9920
(Should be short from this afternoon)

Whipsaw still evident, selling into the top of the trend line and volatility.

Rate under 1.9720 area important but rally back clears weak shorts. major stops likely under the 1.9600 handle; likely to be challenged soon but given conditions a bounce is coming first (which happened after FOMC)
Upside remains limited in my view but ranges can be wide as evidenced by the past few days of trade. Sell rallies if not short; buying dips dangerous in my view.
Drop to under the MA’s very important, long selling wick makes sell side attractive for further losses. Need down bars with higher volume to confirm.
Overnight data unfriendly with more to come, Some pressure from EURO also.
Rate attracting bids from momentum players so look for stops close-in overnight.

Data due Thursday: All times EASTERN (-5 GMT)

2:00am GBP Nationwide House Prices m/m -0.5%-0.6%


Resistance 3:  1.5700/10
Resistance 2:  1.5680
Resistance 1:  1.5650
Latest New York:  1.5615
Support 1:  1.5580
Support 2:  1.5540/50
Support 3:  1.5520

Other Things to Watch/Open Trades/News

4-22-08 SHORT EURO/USD 1.6000 Stops @ 1.5750
4-24-08 SHORT EURO/USD 1.5650 Stops @ 1.5750

ROLL Stops to 1.5750 on entire position; look to add to shorts again later today.

Close under the 1.5550 area sets up a test of stops.

Market has failed at 1.6000 area resistance with confidence now, be patient on the potential break. Overhead resistance is heavy above the 1.5750 area now with 1.5660 first; traders say offers extend into the 1.5800/30 area with stops above. Two-way trade at resistance to start on Monday suggests a deeper pullback is in the works. Strong long-liquidation break is still coming; test of the lows as expected Wednesday. Watch for two-way volatility. Be ready to add quickly if a rally happens; rate has BIG stops under the 1.5520 area and a break under the 50 bar MA could be swift. Rally after FOMC is a “head fake”; look for retreat within 24 hours.

Data due Thursday: All times EASTERN (-5 GMT)

All Day EUR Holiday: Labour Day


Resistance 3:  104.80
Resistance 2:  104.50
Resistance 1:  104.20/30
Latest New York:  104.01
Support 1:  103.50/60
Support 2:  103.20/30
Support 3:  103.00

Other Things to Watch/Open Trades/News

4-30-08 SHORT USD/JPY 104.80 Stops @ 105.80

BOJ leaves rate unchanged, lowers GDP estimate from 2.1% to 1.5% for 2008

Extra effort by the bulls cleans out stops and makes the 105.00 area in view now; failure at 104.80 Wednesday AM set-up break after FOMC. Failure on Tuesday sets the tone for a test of 105.00 area at some point Wednesday (that is done now). Traders note that the market is still trading technically and expect stops to be run in both directions near-term; expect some volatility. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. With rate back under the 104.00 handle expect a bounce from the 103.20/30 area if stops accelerate the move; look to sell that bounce the next 48 hours; which we are in now. Rate looking for a failure by Thursday afternoon.

Data due Thursday: All times EASTERN (-5 GMT)

7:50pm JPY Monetary Base y/y -2.3%0.0%


Resistance 3:  1.0500
Resistance 2:  1.0480
Resistance 1:  1.0450
Latest New York:  1.0355
Support 1:  1.0320/30
Support 2:  1.0300
Support 3:  1.0270/80

Other Things to Watch/Open Trades/News

4-29-08 SHORT USD/CHF 1.0380 Stops @ 1.0480

Look to add to positions on a drop under the 1.0300 handle later in the week

Rate clears stops above near-term resistance. Rate dropping back from top of range; look for a sell-off from here but news is needed. FOMC provided the impetus, pullback was bought after the fix on Tuesday again and the rate tested the 104.30/40 area for the failure.
Test of the lower range now expected if rate can attract some momentum.
Expect a bounce from 1.0250 now so be nimble though as a break below there likely to draw aggressive selling. Rate has set up to attract dip buying so we need to see if that will continue on the next pullback. Need a failure at 1.0420 near-term to hold short in my view. No follow-through is to be respected; look for offers to show up higher than the1.0400 handle now that the bounce followed through higher.

Data due Thursday: All times EASTERN (-5 GMT)



Resistance 3:  1.0180
Resistance 2:  1.0140/50
Resistance 1:  1.0090/1.0100
Latest New York:  1.0071
Support 1:  1.0020/30
Support 2:  1.0000
Support 3:   .9970/80

Other Things to Watch/Open Trades/News

4-29-08 SHORT USD/CAD 1.0130 Stops @ 1.0230
SELL on a close under 1.0050 today

Failure to close above the 101.80 area suggests
the rate has a failed rally (top of range).

Sharp break early Monday suggests sellers trying to take control; bounce off the
MA’s expected but volumes not high. OK to hold through the close if not stopped out as stops are out of range from last week. Close below 1.0100 now needed to set up break into the bottom of the range in my view. Lack of downside follow-through Friday suggests rate is “stuck”. OK to day trade from both sides if aggressive.
Rate closed under the 1.0100 area today, look for a close under 1.0040/50 area to set-up a deeper pullback later this week; stops likely under the .9980 area in size
Nothing to do but continue to wait in my view; price is inside “no man’s land”

Data due Thursday: All times EASTERN (-5 GMT)

11:45am CAD BOC Governor Carney Speaks

Analysis by: written by Jason Alan Jankovsky

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