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• USD rallies in thin conditions
• No news, likely technical trade
• Equities fall driving EURO lower
Overnight Preview
• Look for two-way action and consolidation
• Better liquidity will help with ranges
Looking Ahead to Wednesday All times EASTERN (-5 GMT)
• 11:00am USD FOMC Member Kohn Speaks
• 1:00pm USD FOMC Member Stern Speaks
Summary
Despite a US holiday and thin conditions the USD rallied after the start of the mostly-closed New York markets opened today; traders note that technical factors likely drove trade as the USD rose to new highs against the Swiss Franc. Rising to a new two-year high for a high print at 1.1880 conditions were dismal as traders were forced to cover back open shorts expected to be set into Wednesday. News was light as the Greenback continued to rally all day making significant highs against all pairs but still holding existing monthly ranges for the most part. EURO sank back under the 1.2600 handle in a surprise move as US equities fell back for triple-digit losses; low prints at 1.2508 making a mess of near-term balance sheets. GBP also fell in sympathy with EURO for a low print at 1.5361 finding stops under the 1.5500 handle layered all the way under 1.5400; traders note cross-spreading continued for Yen as the Yen held firm across the board. USD/JPY held earlier ranges but did drop on equities weakness for a low print at 97.30 before recovering back to trade the 98.00 handle but was unable to hold. In my view, the USD benefited today from super-thin conditions and poor liquidity driving back to test previous highs but is unlikely to hold gains. Two-way trade is likely into tomorrow and the lows from the major pairs are likely to hold at least for one try. Tomorrow’s data is likely not to be market moving at all suggesting that more technical trade is coming. Look for two-way action tonight in Asia with light follow-on buying of USD early overnight.
GBP/USD Daily
Resistance 3: 1.6320/30
Resistance 2: 1.6250
Resistance 1: 1.6100/10
Latest New York: 1.5402
Support 1: 1.5380
Support 2: 1.5280/1.5300
Support 3: 1.5220
Comments
Follow-on selling drops rate, cross-spreaders on the sell side of the sterling pairs kept the rate under pressure. Thin two-way action. Stops under the 1.5500 area drop rate into next support area around 1.5400. Technical trade overnight. Resistance at 1.6000 likely to cap near-term. Likely more bad news also due this week which will pressure calls for another BOE rate cut next month but that might be factored in. Traders note unwinding of Yen cross-spreads driving a lot of trade after the open. EURO/GBP still near a record high encouraging a round of profit taking soon I think. Traders note liquidity is only moderate and still on the lower side. Aggressive traders can look to buy the next dip. Expect more whippy action. Two-way action likely to continue.
Data due Wednesday: All times EASTERN (-5 GMT)
4:30am GBP Claimant Count Change
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Unemployment Rate
5:30am GBP BOE Governor King Speaks
5:30am GBP BOE Inflation Report
EURO/USD Daily
Resistance 3: 1.3200/10
Resistance 2: 1.3150
Resistance 1: 1.3030
Latest New York: 1.2535
Support 1: 1.2480
Support 2: 1.2420/30
Support 3: 1.2400
Comments
Rate drops back in thin conditions; resistance is sold but large names on the dips traders say; Russians possibly buying on the dips. Stops under the 1.2600 area possibly in size. Traders note large stops at the 1.2950 area with more over 1.3000 but offers likely to cap on first try if a bounce from potential pennant bottom holds. Bids on dips from profit-taking shorts some desks report. Rate possibly getting spillover effect from GBP and vice-versa suggesting both pairs may track each other near-term. Support also from cross-spreaders as they unwind Yen. Official interest noted traders say. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. Traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market.
Data due Wednesday: All times EASTERN (-5 GMT)
5:00am EUR Industrial Production m/m
1:00pm EUR ECB President Trichet Speaks
Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)
Analysis Provided by: Forexpros - Written by Jason Alan Jankovsky
DISCLAIMER: Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
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Forexpros.com Daily Analysis - 12/11/2008
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