Today’s US Dollar Trading
• USD two-way all day
• Starts on the offensive—ends on the defensive
• GBP and EURO at technical resistance.
• Look for a quiet evening ahead of FOMC
All times EASTERN (-5 GMT)
• 8:30am USD Core Durable Goods Orders m/m
• 8:30am USD Durable Goods Orders m/m
• 10:00am USD New Home Sales
• 10:30am USD Crude Oil Inventories
• 2:15pm USD FOMC Statement
• 2:15pm USD Federal Funds Rate
Despite a better start overnight the USD was unable to hold significant gains today after the release of disappointing US data gave traders a reason to sell the Greenback. Although the early volatility was important enough to make new highs or lows on the day for the USD it wasn’t enough to put most pairs into new ranges; traders note that volumes were moderate and both sides seemed to find a reason to take a stand. Trading has been muted the past 24 hours with most desks reporting that concern over the FOMC rate announcement due out tomorrow is keeping larger players quiet; although larger names have been seen at the highs or lows today. Cable initially firmed following EURO but took at hit when the UK mortgage numbers overnight were less than inspiring. Falling to a low print at 1.9622 in early New York the GBP reversed course and rallied to a high print at 1.9726 before offers capped the move today. US data lifted both the GBP and the EURO but neither pair could hold gains as both pairs were at technical resistance during the day. EURO stalled just above the 50 bar MA for a high print at 1.5623 before falling back and leaving a long selling wick on the day. I suggested earlier in the day to liquidate your long EURO position and if you are holding longs still be ready to exit those positions overnight. I don’ think the EURO has what it takes to hold above the 50 bar MA near-term. USD/JPY broke down to post a daily low at 107.36 before rallying all the way back to the 108.00 handle; then dropping mid-range on the close. At no time did the rate ever make the impression it intended to break out to a new high or a new low. Traders note that the rate is simply stuck in an existing range and may be there through the FOMC announcement tomorrow. Swissy also broke to new lows at the 1.0348 number before bouncing off the 50 bar and 100 bar MA’s on the daily chart. In my view, the USD/CHF is firming a bit too much to be short. I would look to take the trade off the next 24 hours if the rate continues to gain above the 1.0400 handle near-term; such as overnight. In my opinion, the USD will cover a lot of the same ground tonight and into the FOMC meeting tomorrow. Look for a rally as a selling opportunity.
Resistance 3: 1.5680
Resistance 2: 1.5650/60
Resistance 1: 1.5620
Latest New York: 1.5567
Support 1: 1.5500/1.5490
Support 2: 1.5470
Support 3: 1.5450
Rate unable to hold gains after surprise rally into the 1.5620 area; long selling wick companion to the bid wick from Monday. Rate likely stuck in tighter range for now. Russians buying EURO a good sign but watch for model accounts on the bid the next few days. 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. Bids will likely be in the 1.5500/20 area or so. Expect higher action this week as late shorts get squeezed. If long, better to get flat or reverse.
Data due Wednesday: All times EASTERN (-5 GMT)
4:00am EUR ECB President Trichet Speaks
4:00am EUR Italian Retail Sales m/m
Resistance 3: 108.80
Resistance 2: 108.50
Resistance 1: 108.20
Latest New York: 107.76
Support 1: 107.20/30
Support 2: 107.00
Support 3: 106.80
Rate whipsaws around current S/R; unable to gain traction above or below recent boundaries. Volumes lighter and upside resistance is firm at 108.00 area or a shade higher. Failure to close above the 108.00 handle Monday a good sign rate is ready to break back to the lows looking for stops under the 107.10/107.00 area. Exponential reversal signal still valid, rate is two-way but weaker each day. If short—let it work. If today’s rally fails under the 108.00 handle look for a drop into stops under the 107.00/10 area the next 24 hours. Look to add if rate can hit the stops in the 107.00 area near-term. Some topping seen; expect volatility. USD likely not this strong but more benefiting from Yen weakness. Stops likely rolled up under the 107.00 area for today so if a break happens—look for a drop to the 106.00 handle fairly quickly.
Data due Wednesday: All times EASTERN (-5 GMT)
Analysis by: Forexpros.com written by Jason Alan Jankovsky
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