Daily Forex Trading Analysis

Overnight Asia/Europe

• USD two-way and driven by technicals
• Volumes better
• Sentiment shifting more to “normal”


Today’s Economic Reports
All times EASTERN (-4 GMT)
• 10:00A USD Fed Chairman Bernanke Testifies
• 10:00AM USD CB Leading Index m/m

Looking Ahead to Tuesday
All times EASTERN (-4 GMT)
• Tentative USD FOMC Member Stern Speaks
Light day for all pairs tomorrow, expect technical trade.


Summary
The USD is mixed in solid two-way trade after starting overnight in directionless activity. Forex traders note that interest from both sides appears solid today with volumes noticeably better than the last few weeks. If the financial crisis is finally mitigating and banks are beginning to see liquidity loosen up then it is a fair bet that the markets are returning to “normal” at some pace now. Traders note that semi-official and sovereign interest in EURO is appearing on the dips to the 1.3380/1.3400 area of technical support; despite the recent volatility EURO is well-supported on dips. Aggressive traders can buy any dip under the 1.3400 area as the bottom appears to be forming finally in that area. High prints for the EURO overnight Asia at 1.3531 but stops were the main driver traders say; low prints at 1.3396 so far today with the rate opening New York near the lows this morning. GBP tracked EURO lower with mild UK data non-supportive traders say; low prints at 1.7277 and highs at 1.7520 but rate is firm in NY trade. USD/JPY continues to sketch out a trading range but failed to extend to the top of the recent range last week but highs were a respectable 102.44 before selling pressure returned. Traders note that equities are firmer this morning which is supporting the rate a bit but also remind that oil is sharply higher this morning also which is probably lending some upside pressure keeping the rate from advancing. No matter how you slice it oil is still expensive relative to recent years and that is not a positive for USD. Other pairs are also mixed today; Aussie is higher but Swissy and Loonie are flat to lower to start New York. Traders note that today’s start to the week is technical in nature with S/R holding about where expected from last week’s action. Look for a slow start to the week as fundamentals will be light for the next 24 hours or so and traders are beginning to focus away from the financial crisis now that things are returning to more “normal” conditions. There is still a lot of uncertainty out there but the sentiment is beginning to look beyond the crisis back to the long-term USD negative economic conditions. In that environment it is likely the USD will remain under pressure. As that develops there will be a lot of two-way action for us to get positioned around.


GBP/USD Daily

Resistance 3: 1.7720
Resistance 2: 1.7680
Resistance 1: 1.7630/40
Latest New York: 1.7397
Support 1: 1.7130
Support 2: 1.7100
Support 3: 1.7020/30

Comments
Rate opens firm but ranges are slow to extend. Today’s action again very two-way. Drop under support around the 1.7380 area challenged and stops found under for lows; rally back to test for resistance finds a pullback to new support around 1.7300. Rate at buy zone now but range appears wider. Cross-spreading liquidation likely supporting the rate but two-way action adding to volatility. Monthly lows around the 1.6800 area likely to hold now. Traders note quality bids on the dip suggesting a bottom is in here somewhere. A solid close over the 1.7300 handle has likely helped the longs; expect more buying on dips. Aggressive traders can look to the buy side again on any dip the next day or so. Follow-on selling likely from technical’s but spillover strength from EURO likely to be better to end the week. Look for a recovery back to the 1.8000 handle near term; two-way action likely to continue. Confirmed sovereign interest on the dip last night as semi-officials seen on dips in both EURO and GBP recently. Traders report cross-spreading for Sterling crosses likely driving the rate near-term.
Data due Tuesday: All times EASTERN (-4 GMT)
Tentative GBP BOE Governor King Speaks
6:00AM GBP CBI Industrial Order Expectations


EURO/USD Daily

Resistance 3: 1.3620
Resistance 2: 1.3580
Resistance 1: 1.3530
Latest New York: 1.3428
Support 1: 1.3350
Support 2: 1.3300/10
Support 3: 1.3280


Comments
Rate remains range-bound but firm, upside capped around the 1.3500/20 area near term; semi-official names again seen on the dips overnight. OK to look to the buy side again early this week. Dip from highs holds technical support and should attract a rotation higher but traders warn of stops close-in; likely both ways so be ready for whipsaw. Rate is an absolute screaming buy in my view. Oil two-way spills over into pricing but rate firm despite lower oil. Traders note stops building above the market along with offers. Expect more two-way action with upside bias; traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market. Traders suggesting that the rate is continuing to trade technically. Traders note official names overnight this time.
Data due Tuesday: All times EASTERN (-4 GMT)
NONE

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