Daily Analysis

Today’s US Dollar Trading
•    USD fails to gain a foothold, ends lower across the board
•    Model accounts buying EURO, possibly going long
•    Volumes continue on the lighter side

Overnight Preview

•    Look for the USD to consolidate overnight
•    Should get quiet ahead of US data tomorrow

Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
•    8:30am USD Building Permits
•    8:30am USD Core CPI m/m
•    8:30am USD CPI m/m
•    8:30am USD Housing Starts
•    2:15pm USD FOMC Statement
•    2:15pm USD Federal Funds Rate

The USD remains under pressure to end Monday as several technical levels fail putting the majors on the offensive into tomorrows’ FOMC meeting. Analysts remain optimistic for a 50 BP cut in rates adding a bit of weight to current USD sentiment. At this point the USD remains the worlds’ number 2 low-yielding currency with only the Yen providing less. With year-end repatriation into higher-yielding currencies as traders square-books with only a few solid trading days to go into year-end the USD appears likely to suffer more losses this week. Despite weaker equities today USD/JPY was able to hold the important 90.00 handle with lows at 90.14 during early New York trade; traders note the pair may be subject to a short-squeeze soon suggesting the USD may have a technical rally but as more news comes from the US this week a rally may be seen as a selling opportunity. Traders note that bids appeared under the 90.50 area and the rate closes firm above there. EURO and GBP rallied on stops and active buying; EURO high print at 1.3704 and GBP at 1.5380; lows overnight went unchallenged during New York trade. EURO saw model and momentum accounts scrambling to cover shorts and possibly enter longs anticipating further gains but traders note technical resistance and offers waiting around the 1.3750/60 area. GBP retreated a full handle under the highs to end New York around the 1.5250 area as sellers appeared at the highs. Traders note that a record high in the EURO/GBP rate suggests that the sell side of the GBP may be harder to overcome and more selling will appear on further strength. USD/CHF fell into the 1.1500 handle for a low print at 1.1563 before regaining the 1.1600 handle but with firmer Gold prices the rate is likely to suffer more losses; technical support in the rate is seen near the 1.1520/30 area overnight. USD/CAD low prints at 1.2229 were enough to encourage a small technical bounce but the rate was unable to hold the 1.2400 handle after a short-covering rally. The rate closes near the 1.2380 area in thin conditions. Across the board traders note that conditions were thin and some saw solid one-way trade but the USD has suffered technical damage today that will likely result in selling pressure on a rally. In my view, the USD continues to show signs of topping and with the rally above key resistance in EURO  the picture continues to show more USD weakness coming. Look for any retracement of the USD to result in buying of major pairs.

Resistance 3:  1.5500/10
Resistance 2:  1.5450
Resistance 1:  1.5380
Latest New York: 1.5279
Support 1:  1.4850
Support 2:  1.4740
Support 3:  1.4680


Two-way technical trade holds pair lower until pressure from EURO lifts rate into resistance. Lows holding at 1.4900/10 area. Bounce off early weakness suggests buyers are willing on dips; aggressive traders can buy the next dip in my view, look for prices around the 1.4780 area on a break. Rally in EURO holds under pressure from cross spreaders; stops finally enough to hold above 1.5200 area. Cross-spreaders likely keeping pressure on as GBP/EURO cross holds near lifetime high. Although close is above the 1.4850 area the failure at highs is still a caution. Traders note solid two-way action. Sellers hold control above 1.5100 area so far; profit-taking likely to result in a squeeze on the further strength. Technical trade overnight again. Traders note liquidity is only moderate and still on the lower side.
Data due Tuesday: All times EASTERN (-5 GMT)
4:30am GBP CPI y/y
4:30am GBP Core CPI y/y
4:30am GBP RPI y/y
Tentative GBP BOE Inflation Letter

Resistance 3:  1.3780
Resistance 2:  1.3750
Resistance 1:  1.3700/10
Latest New York:  1.3692
Support 1:  1.3360
Support 2:  1.3280
Support 3:  1.3200


Rate scores another new high in early New York but sellers take a stand above 1.3700; likely stops building in size over the 1.3750 area now. Close at 1.3380 area last week makes a seven week high close and argues for more upside coming but a correction is likely. Likely bulls will lighten up. OK to buy a dip on a test of 1.3080 area near-term; but that is less likely now that 1.3700 trades. Support also from cross-spreaders as they unwind Yen. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers.
Data due Tuesday: All times EASTERN (-5 GMT)
2:45am EUR French CPI m/m
2:45am EUR French Final Non-Farm Payrolls q/q
3:30am EUR German Flash Manufacturing PMI
3:30am EUR German Flash Services PMI
4:00am EUR Flash Manufacturing PMI
4:00am EUR Flash Services PMI
5:00am EUR Employment Change q/q
Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

Analysis by: – Written by Jason Alan Jankovsky

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