Daily Analysis – 03/06/08

Today’s US Dollar Trading
• USD mixed, US data no help
• Stops drive a lot of early trade
• S/R broken but the majors bounce back

Overnight Preview

• USD likely to trade two-way
• Consolidation ahead of the news later in the week likely

Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 9:00am USD Fed Chairman Bernanke Speaks
• 10:00am USD Factory Orders m/m 0.0%
• Tentative USD Domestic Vehicle Sales 10.8M

The USD ends the day mixed after starting overnight mixed against the majors. Despite slightly better-than-expected US data this morning the USD sold off to make lows against most pairs by about the London Fix; after that the Greenback settled into two-way trade that gradually ground higher to end the day mid-range. Stops were the larger part of the day’s action traders say with only the GBP dropping into technical support. For the most part the USD fell back to test recent S/R and more technical two-way trade is expected overnight as fundamental news is light ahead of NFP later this week. Cable fell back from a high print overnight at 1.9776 to post a New York low at 1.9595 before rebounding; holding above the 1.9630 area is a good clue the rate will rotate higher the next 24 hours or so. Volumes were only moderate traders say so it is possible that GBP will remain two-way within existing S/R. EURO fell through support on stop driven trade for a low print at 1.5485 before rallying out of the hole to post a high print at 1.5591 before offers capped the rally. Again, traders say volumes were only moderate and the rate is expected to remain range bound. Both pairs appear to be tracking one another so aggressive traders can look to buy dips and you can expect a signal the next 24 hours or so. USD/JPY fell through several layers of support as well dropping to a low print on stops at 104.01 before bouncing to the 104.50 area. Stops under the 104.50 area were absorbed easily but offers were finally able to push the rate into the 104.20 area and once cleared the rate rebounded on profit-taking. Swissy had an identical day but fell through the 1.0380/90 area considered to be the monthly pivot point; closing under the 1.0350 area the rate looks for more weakness near-term but as in other rates analysts expect two-way trade. Looking ahead the next 24 hours I would expect the USD to consolidate within existing ranges. Look for more opportunity to short the USD on strength near-term.


Resistance 3:  1.9780
Resistance 2:  1.9720
Resistance 1:  1.9680
Latest New York: 1.9660
Support 1:  1.9600/1.9590
Support 2:  1.9550
Support 3:  1.9520

Long wick suggests bid pressure for two-way action coming, rumors of official demand lift rate off the lows around the 1.9590 area; failure to put on weight above the 1.9700 area suggests rate will consolidate lower. Lots of potential for day traders the next 24-48 hours as the rate is likely to stay range bound ahead of US data later in the week. Fundamentals still suggest a lower GBP and the failure to extend gains above the 1.9850 area so soon after Friday’s reversal argue for a continued downside after a bounce is possible.  Continue to expect a lot of sympathy trade with EURO; the cross-spreaders are having a field day with the Sterling crosses and I think the GBP may track EURO near-term. Need a close below the 100 bar MA to build argument for the short but volatility is higher so expect a rally back to test the breakdown, expect continued whipsaw.

Not a lot to do but wait in my view.

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

Tentative GBP Halifax House Price Index m/m -1.1%
4:30am GBP Construction PMI 45.7
7:01pm GBP Consumer Confidence Index 68

Resistance 3:  105.50
Resistance 2:  105.20
Resistance 1:  104.80
Latest New York:  104.49
Support 1:  104.00
Support 2:  103.70/80
Support 3:  103.40/50


Rate broke into stops under the 104.20 area but no one was home and the rate recovered after the move. Not likely to see further weakness without an attempt at a rally in my view. Monday’s close leaves a doubt to the potential; expect lot’s of two-way action and the rate is likely to cover a lot of the same ground twice the next 24-48 hours. Stops the other side of 105.80 are in size suggesting that speculators got heavily short last week. This week’s data may be largely ignored until NFP out later in the week.  

Look for stops to be raised up by the longs this week and some should be resting under today’s lows around the 104.50 area (likely cleared with today’s drop)

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

9:00am JPY BOJ Governor Shirakawa Speaks
7:50pm JPY Capital Spending q/q -9.6%


Analysis by: written by Jason Alan Jankovsky

Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.