Today’s US Dollar Trading
•USD remains two-way, volumes thin
•Majors hold support, USD fails late in the day
•Equities and Energies in focus due to lig
•Look for the USD to continue two-way
•Book-squaring ahead of US news possible overnight
Looking Ahead to Thursday
All times EASTERN (-5 GMT)
•8:30am USD Unemployment Claims
•10:00am USD Fed Chairman Bernanke Testifies
•10:35am USD Natural Gas Storage
Claims likely to be main focus tomorrow.
The USD continued to whipsaw today losing important ground against the majors as the lack of fundamental news kept traders focused on Equities and Energy. Although crude oil prices have stabilized today without a large swing either way, equities continued to soften in two-way action pressuring the Greenback into lows late in the New York session. With little to focus on besides equities and energy, traders were mostly sidelined unless prices moved to a particularly attractive area for most players; desks reported that volumes were very light all day and may have contributed to exacerbating the losses seen. Cable rallied off low prints at 1.9671 to post a new high for the day at 1.9824 but traders again noted thin conditions. Stops in expected areas indeed helped the action but the rate is not expected to continue higher without help. EURO also rallied but stalled again at the 1.5750 area and drew protective option selling ahead of the 1.5770/80 area; high prints at 1.5750 exactly apparently left the option barrier intact near term. Sellers included recent Asian sovereigns traders say suggesting the rate is topped for now. USD/JPY was unable to break the overnight high on whipsaw volatility and fell to new lows as stocks wilted; stops were elected again under the 107.00 handle for a low print at 106.76; traders note that the rate has lots of sell interest on rallies this week suggesting the rate will not be able to break offers resting at 107.70/80 area. USD/CHF also dropped but was unable to uncover resting stops said to be in the 1.0270 area; low prints at 1.0276 drew bids and the rate briefly managed a few hours over the 1.0300 handle into the close; close under the 1.0300 handle today seen as opening the door for further losses this week. Our orders to sell GBP on this rally were filled and new orders for USD shorts are working. Most likely we will need to adjust those orders tomorrow as the Greenback doesn’t look very healthy near-term. Look for more two-way action and a rally by the USD as the two-way action will likely remain ahead of US data in the morning.
Resistance 3: 1.9900
Resistance 2: 1.9850
Resistance 1: 1.9820
Latest New York: 1.9805
Support 1: 1.9750
Support 2: 1.9690/1.9700
Support 3: 1.9650
Rate rallies a full handle to breach new highs but volumes light; could be a head fake. Sell signal negated just as the resting order gets filled; expect volatility. Bids around the 1.9660 area from “large names” cushioned the break; short-covering likely igniting the rally. Traders expect GBP to track EURO this week. Traders now expect a top to form as the rate had thinner volume on the rally into the reported option defense last week and early this week. Rate fails at high prints near previous resistance so a correction is still developing. Spillover weakness/strength from EURO still likely all week this week. Continue to expect a lot of cross-trading. G-8 data may create some whipsaw again. Today’s US data likely no factor.
Data due Thursday: All times EASTERN (-5 GMT)
Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate
Resistance 3: 1.5800/10
Resistance 2: 1.5780
Resistance 1: 1.5750/60
Latest New York: 1.5732
Support 1: 1.5630/40
Support 2: 1.5600/10
Support 3: 1.5580
Eurozone GDP revised lower but rate is unaffected, technical trade and sympathy with Cable remains the main driver. Rally today hits a brick wall at 1.5750. Major support at the 1.5580 area and slightly below. Stops elected under the 1.5680 area overnight but option defense reported at 1.5650 area. Stops noted under the previous lows layered under 1.5600 to 1.5550 traders say. Should cable break—EURO could go with it. The 50 bar MA likely to offer support should the rate fall back; bids will likely be in the 1.5580 area or so on any meaningful correction. Exponential reversal still valid. Oil higher helping to lift a bit.
Data due Thursday: All times EASTERN (-5 GMT)
2:45am EUR French Industrial Production m/m
4:00am EUR Italian Industrial Production m/m
5:00am EUR ECB Bulletin
1:45pm EUR ECB President Trichet Speaks
Analysis by: Forexpros.com written by Jason Alan Jankovsky
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