Daily Analysis – 23/06/08

Overnight Asia/Europe
• USD firms a bit
• Technical trade and stops drive GBP and EURO
• Volumes moderate

Today’s Economic Reports
All times EASTERN (-5 GMT)
• None for the day
Expect technical trade for the most part

Looking Ahead
All times EASTERN (-5 GMT)
• 9:00am USD National HPI Composite-20
• 10:00am USD Consumer Confidence
• 10:00am USD House Price Index m/m
• 10:00am USD Richmond Fed Index

The USD is two-way overnight but starts the New York session on the offensive. Still range-bound against Swissy and Yen, the Greenback has recovered some of the losses from late last week. After starting firm in Asia and weakening on exporter supply, the USD/JPY has advanced back to the 107.80 level for a high print in New York at 108.89 but traders see a lot of offers layered up to the technical resistance area of 108.00/10. Stops are said to be over that figure but the overall sentiment is for lower USD/JPY for the week. Swissy is back in the sell zone around the 1.0440/50 area; aggressive traders can look to sell the pair anywhere over the 1.0440 area in my view. The rate is technically weak trading higher on lighter volume and stops above the 1.0410 area so a pullback and long selling wick would be ideal today in that pair. Cable has dropped dramatically tracking EURO lower as both rates suffer from cross-spreading and poor German IFO data. Cable fell from the high print at 1.9760 overnight for a low print in early New York at 1.9699 and remains under pressure. Traders note that the lower-than-expected German IFO data disappointed EURO dropping the rate back into close-in stops at the 1.5550 area for a low print in late Europe at 1.5498 where Asian sovereign demand was seen. Aggressive traders can look to buy EURO under the 1.5520/30 area today and expect a buy signal during New York action today. Across the board traders note that volumes are modest and action is technical. All the pairs are trading inside established ranges from last week so nothing really significant is happening just yet. In my view, you can expect a further decline in GBP today and through the week while the USD/JPY and USD/CHF will likely remain range-bound and under pressure. Expect a slow-grind in those pairs. EURO is likely to firm up and advance this week as the technical’s look positive and the market needs to price in a 25 BP rate hike coming in two weeks from the ECB. Look for the USD to remain two-way but weaker today.

Resistance 3:  1.9750/60
Resistance 2:  1.9720
Resistance 1:  1.9680
Latest New York: 1.9612
Support 1:  1.9580
Support 2:  1.9550
Support 3:  1.9520


Toolbox provides another strong sell signal overnight, target is short is around the 1.9480/19500 area through the week. Surging oil prices helped EURO last week but a softer start is likely spilling over into GBP. Spillover weakness from EURO still likely all week.  Continue to expect a lot of cross-trading. Aggressive traders can add to their open shorts anywhere under the 1.9650 area I think; if not short sell a rally into the 1.9650/80 area if you get it today. 

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

4:30am GBP BBA Mortgage Approvals

Resistance 3:  1.5680
Resistance 2:  1.5650/60
Resistance 1:  1.5620/30
Latest New York:  1.5523
Support 1:  1.5550
Support 2:  1.5500
Support 3:  1.5470

Rate drops back under the 1.5550 area to start the week; should get a buy signal the next day or so. The 50 bar MA offering resistance; close over the 50 bar likely to draw more buying early in the week but for now there is pressure coming on in that area. Close Friday above the 1.5550 area failed to attract more buying, drop into close in stops near the 1.5550 area from late longs; a dip is likely a buying opportunity. Bids will likely be in the 1.5500/20 area or so. Expect higher action next week as late shorts get squeezed. If long, OK to hold over the weekend. Buy the next dip to add to positions.
Data due Tuesday: All times EASTERN (-5 GMT)

Tentative EUR German Import Price Index
2:45am EUR French Consumer Spending

Analysis by: written by Jason Alan Jankovsky

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