Daily Analysis – 24/07/08

Today’s US Dollar Trading
• USD regains poise after early break
• Oil and equities help the upside
• Volumes moderate

Overnight Preview

• Expect two-way action
• USD to consolidate

Looking Ahead to Thursday
All times EASTERN (-5 GMT)
• 8:30am USD Unemployment Claims
• 10:00am USD Existing Home Sales
• 10:00am USD FOMC Member Geithner Speaks
• 10:35am USD Natural Gas Storage

After a slide overnight against GBP and EURO the USD rallied back in late US trade to regain some territory after oil continued to slide and equities put on some weight. The Greenback is at better levels against all the majors than the start of US trade and is poised to challenge stops above the market across the board. Today’s US data was benign and more important data is due for tomorrows release and some traders are looking for the USD to make additional highs for the week although today’s rally volumes were not impressive suggesting that the majors are consolidating recent losses before making a more pronounced move the next 24-48 hours. Cable rallied above the 2.0000 handle but as been the custom above the 200 bar MA does not “feel comfortable” holding gains; the GBP fell back to trade the mid-1.9900 area leaving a strong selling wick above the market. Highs at 2.0032 were on very light volumes and largely stop driven before dropping back to make US lows under the 1.9970 area. A close below the 1.9950 area again is needed to drive the longs to the sidelines and that may come on the Tokyo open in my view. EURO fell as oil slid off and making lows for the US session and the day as well; some stops cleared as the rate dipped under the 1.5680 area for a low print ahead of the close at 1.5669; volumes were modest most desks report. USD/JPY struggled with offers at the 108.00 area managing a high print at 107.98 but has not retreated more than a few pips suggesting that a try for stops above the 108.00 area may be on the hook for tonight’s action. Aggressive traders can place a resting limit order to liquidate longs at 108.25 looking for a test of offers at the 108.40 area; if you are really aggressive you might try a close and reverse but with US housing data still to come there is potential for the rate to try for the high 108’s the next 24 hours. Minor whipsaw today paved the way for small accounts to get cleared as they have been on the wrong side of the stops near-term. In my view, look for the USD to consolidate with a bit more upside on the books overnight. 

Resistance 3:  2.0080
Resistance 2:  2.0050
Resistance 1:  2.0020/30
Latest New York: 1.9973
Support 1:  1.9880
Support 2:  1.9840/50
Support 3:  1.9820

Rate rallies back in lighter volume, stopped out of third add. Potential for large range overnight unexpected and likely more head-fake. OK to add again if rate fails from the highs by the end of the day. Stops at 2.0050 area but offers are there too traders say. Traders report interest on the sell side from large names and Asian Sovereigns but they were on the bid from the lows overnight this time. Rate tracking EURO as expected but unable to break out either way yet. Hold shorts; bids under the 1.9950 area likely cleared, stops likely now after upper stops cleared. Offers from large names traders say; if 1.9950 fails on the close today it could be a big drop. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading. 

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

4:30am GBP Retail Sales m/m
1:00pm GBP MPC Member Bean Speaks

Resistance 3:  1.5900
Resistance 2:  1.5850
Resistance 1:  1.5800/10
Latest New York:  1.5685
Support 1:  1.5650
Support 2:  1.5620/30
Support 3:  1.5580 (MAJOR SUPP)

Rate still two-way, dragged higher by Cable but offers at 1.5750/60 capped any further daily strength today. Stops above the 1.5820 area out of reach so far today. Hold shorts and let it work. Stops under the 1.5700/1.5680 area likely in size; expect a sharp break and a close under the 1.5700 area if triggered. Large names on the offer reported into the highs, look for a top to form. Major support at the 1.5580 area and slightly below. 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; which is looking better after the break this week. Exponential reversal still valid.  

Data due Thursday: All times EASTERN (-5 GMT)
3:30am EUR German Manufacturing PMI
3:30am EUR German Services PMI1
4:00am EUR German Ifo Business Climate Index
4:00am EUR German Ifo Business Expectations Index
4:00am EUR Manufacturing PMI
4:00am EUR Services PMI
4:00am EUR Current Account

Analysis by: – written by Jason Alan Jankovsky

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