Crude Oil Inventories 0.2M – Morning Session – GMT

Overnight Asia/Europe
•USD weakens further
•IFO better-than-expected
•MPC votes 8-1 to keep rates unchanged

Today’s Economic Reports
All times EASTERN (-5 GMT)
•10:30am Crude Oil Inventories 0.2M
•1:00pm Fed Governor Warsh Speaks
•2:00pm FOMC Meeting Minutes
Looking Ahead
All times EASTERN (-5 GMT)
•8:30am USD Unemployment Claims 373K
•9:00am USD Fed Governor Kroszner Speaks
•10:00am USD House Price Index m/m

The USD continues to weaken in Wednesday’s trade; starting softer in Asia in line with weaker equities pricing. Most of the Asian stock markets were lower overnight in sympathy with the losses seen in the DJIA Tuesday traders say; higher oil prices also dragging on the USD and lifting EURO. Overnight news was light but significant; the BOE MPC minutes showed an 8-1 split to leave rates unchanged with Blanchflower again voting for a 25 BP cut. Traders see the MPC holding rates firm in response to potential inflation pressures and the GBP firmed although still under the highs seen Tuesday; high prints at 1.9699 before selling was seen. Traders say the rate feels “heavy” this morning to start New York and cross spreaders are active in EURO-Sterling. EURO is higher in response to better-than-expected IFO data; high prints at 1.5775 saw profit-taking selling and stops mixed together. Initially weaker in Asia ahead of the news traders note that EURO has closed above important technical resistance in Asia making for a potential extended rally to develop. In my view the EURO has a retracement due before continuing to advance. With Oil prices topping $130 this morning it is hard to argue for a lower priced EURO for very long. USD/JPY is weaker but with two way action more evident. Traders note light stops above the 104.00 area are untouched overnight with high prints at 103.70 capped by exporter selling. Stops under the early lows at 103.40 area were finally found and the rate pressed for low prints at 103.04 before a bounce was seen. Analysts remind that technical support is under the 102.50 area leaving a lot of room for downside stops but I think the rate is due for a bounce. Look to add to open shorts on that bounce. Swissy and Loonie are now at technical downside objectives; aggressive traders can look for a long around current prices or slightly lower for Loonie. An upside correction for Swissy is due in my opinion and the strength of that correction will determine where to short. Aggressive traders can go long around the 1.0310 area

EURO/USD Daily  

Resistance 3:  1.5850
Resistance 2:  1.5820
Resistance 1:  1.5770/80
Latest New York:  1.5758
Support 1:  1.5630
Support 2:  1.5580
Support 3:  1.5550

IFO rallies the pair higher but tech resistance at 1.5770/80 area holds to start New York. Close over the 50 bar MA likely to draw buyers but offers are absorbing so far.  Overnight news suggests that confidence in the economy is continuing to grow and combined with higher Oil prices the rate is likely to be bought on dips. Look for support on dips near the 1.5550 area. Longs likely to have rolled up stops under the 1.5580 area so volatility possible. The rate is setting up for a potential upside recovery. Bounce back from dip under the 1.5500 handle suggests active buying on dips; traders say lots of official and sovereign names seen buying dips. I think the recovery has some legs this time but the late long may have made his move today.   Data due Thursday: All times EASTERN (-5 GMT)5:00am EUR Industrial New Orders m/m -0.4%USD/JPY Daily  

Resistance 3:  104.50
Resistance 2:  104.00/10
Resistance 1:  103.70/80
Latest New York:  103.38
Support 1:  103.00/10
Support 2:  102.80
Support 3:  102.50

 CommentsRate falls back after a weak rally in Asia; traders note that stops were building in size under the 103.50 area with bids layered below to 103.00 area. Overnight low and action played out that scenario and the rate is set to rotate higher. That push higher needs to stall at the 103.80 area again to stay short and ADD to position. Stops said to be large enough to drive the rate through bids for a test of the 102.80 area but bids apparently were big enough on the first try. Upside will continue to be labored now in my view but be nimble on shorts; we need a solid close under the 103.80 area next for the week after a brief corrective rally. Conviction of the sellers being challenged but I think the weak hands are the longs as the volumes are increasing on the breaks and lighter on the rallies. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; Day traders continue to get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Resistance at 104.80 area remains significant now and rallies should be sold. Data due Thursday: All times EASTERN (-5 GMT)7:50pm JPY Monetary Policy Meeting MinutesIn association with Forex Trading Edge