Today’s US Dollar Trading
• USD rallies in US trade after starting weaker in Asia
• Two way technical trade the rule today
• Traders note volumes were moderate
Overnight Preview
• Look for more consolidation
• Two-way action likely
Looking Ahead to Wednesday
All times EASTERN (-4 GMT)
• 10:00am USD Existing Home Sales
• 10:00am USD Fed Chairman Bernanke Testifies
• 10:35am USD Crude Oil Inventories
• 2:30pm USD Fed Chairman Bernanke Testifies
Summary
The USD is slightly better today as traders continue to digest the effects and solutions to the recent financial crisis affecting global trade. Debate is raging on Capitol Hill regarding exactly how to implement the fiscal bailout plan proposed by the US treasury and the Federal Reserve. Sentiment is leaning more toward an emergency plan sooner-rather-than-later and if the US congress fails to act decisively and confidently by the end of the week it is likely that investor confidence in a solution will begin to wane. In response the Greenback opened better overnight and built on small gains into US trade and then as equities failed to hold gains began to slide off. Traders note that stops in most pairs were triggered during US action suggesting that many had set new USD shorts overnight or early today when the USD failed to hold gains but were whipsawed on minor price action. GBP railed for a high print overnight at 1.8636 before dropping back and made lows on the day in New York at 1.8470 before attempting a recovery back to the middle of the range. Traders note volumes were modest but enough to cause some intraday volatility. EURO followed cable lower during the day for a low print at 1.4621 before returning to the 1.4700 handle later; traders note that in both pairs a “buy the dip” mentality is currently in play but no one is certain how far a correction from recent strength may go. End result is that traders are nervous and unwilling to hold positions for too long leaving the markets vulnerable to intraday whipsaw. USD/JPY rallied for a new high in New York at 106.09 before dropping back to the low 105.00 handle; traders note technical resistance at the 106.00/20 area appears firm on the first try at a bounce. Other pairs are suffering the same fate as the USD/JPY; Swissy is off the rally highs at 108.15 with a high print at 1.0891. Traders note that the USD/CHF pair has made a perfect retracement to the breakdown point of 1.0880 before sliding off suggesting that the rate will likely suffer a move back to the lows around the 1.0700 handle. USD/CAD is falling back from its highs as well and looks almost certain to break the 1.0500 handle near-term; traders note that a lot of offers were absorbed in that pair suggesting that there is a lot of technical buying of support in Loonie. In my view, the USD is likely to continue two-way and cover a lot of the same ground twice but with a lower bias. Best action is to sell rallies in my view.
GBP/USD Daily
Resistance 3: 1.8700
Resistance 2: 1.8680
Resistance 1: 1.8620/30
Latest New York: 1.8573
Support 1: 1.8480
Support 2: 1.8420/30
Support 3: 1.8380
Comments
Rate two-way overnight, remains near opening range into the close. Some selling pressure seen but rate is likely to press for highs on more bad news. Resistance is cleared the other side of the 1.8500 handle so expect a pullback to be bought hard. Aggressive traders can buy the next dip but also look to lighten longs into the 1.8700 area if it comes. Equities pullback vote of “no confidence” so far on the bailout. Possible sovereign interest on the rally as semi-officials seen on dips in both EURO and GBP recently. Some stops triggered along with active buying. In my view, the GBP has weathered the storm fairly well and it suggests no serious down move near-term. Traders note stops mixed with offers above the market also. Major support has held for two weeks now, any weakness likely to be bought hard. Profit-taking bids continue as well. Close above the 1.8500 area for the week likely argues for another leg higher to end the month.
Data due Wednesday: All times EASTERN (-4 GMT)
6:00am GBP CBI Realized Sales
4:45pm GBP MPC Member Sentance Speaks
EURO/USD Daily
Resistance 3: 1.4920/30
Resistance 2: 1.4880
Resistance 1: 1.4850
Latest New York: 1.4701
Support 1: 1.4620/30
Support 2: 1.4580
Support 3: 1.4550
Comments
Rate two-way and likely tracking GBP a bit; follows GBP higher but lots of stops and active buying seen. Light pressure intraday easily absorbed despite fear of pullback. New weekly high yesterday below major resistance and rate is inside range so far today suggests a point of indecision. Likely support will hold at the 1.4330 area. Some upside drawn from Cable no doubt. Expect more two-way action with upside bias; traders note the rate is firm on dips so far despite the uncertainty in the market. Volumes better during European trade than in Asia overnight. Traders report offers in size being absorbed. Traders suggesting that the rate is trading technically but likely this rally forced techies to the sidelines. Close over the 1.4700 area to end this week will make a lot of shorts nervous next week possibly extending a short-covering rally. Expect a solid higher close for the week. If long, look to add to positions on any weakness. Likely a dip back to the 1.4300 handle will offer a solid buy opportunity.
Data due Wednesday: All times EASTERN (-4 GMT)
4:00am EUR German Ifo Business Climate
4:00am EUR Current Account
4:00am EUR Italian Retail Sales m/m
Analysis by: Forexpros.com written by Jason Alan Jankovsky
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