Forexpros Daily Analysis - 23/04/08

Daily Forex Analysis

Overnight Asia and Europe

• USD two-sided and consolidates
• No real market moving news

Today’s Economic Reports

• None in the US today

Majors open New York mixed

The USD is trading sideways in a reasonable pattern of consolidation this morning after a quiet two-way overnight session. No real market moving news was on tap and the majors are both sides of yesterday’s New York close. Currently at the start of New York trade the majors are mixed as light volumes and technical trade start the day. The USD is higher against the GBP; overnight highs on light volume were 1.9976 and after the release of BOE MPC minutes the rate sold off for a low print at 1.9866 on better volume. Traders say the split vote was seen as bearish and sentiment continues to be neutral to bearish long term; cross spreading for EURO continues to increase volatility some say. EURO fell back from the all-time high yesterday as traders remain cautious ahead of US data due tomorrow. Desks report thin order books but also a Swiss private bank on the bid around the 1.5960 area; highs overnight at 1.6002 with low prints at 1.5939 during European trade. Stops are likely building under the 1.5920 area and aggressive traders can look to add to shorts on a break into the 1.5800 handle; a close under the 1.5880 area argues for a deeper pullback in my view. USD/JPY is on the defense this morning as no bids were seen in Asia for a high print at 103.34 before offers took over; low prints just ahead of New York at 102.74 making the day an inside range day so far. Forex Traders note that tensions with China ahead of the Olympics and trade talks with the Eurozone are making trade “nervous” which often is seen as USD bullish; potential will likely keep USD/JPY two-way and within established ranges making for good opportunity on the short time-frames. Swissy is also locked inside range today with very little action; traders expect support at the bottom of the range near-term. In my view, today will likely remain a consolidation day with the GBP sliding around for the most part; I don’t think the EURO has another high in mind this week and I think the USD will remain range-bound through the data tomorrow. Look for data to be USD neutral-to-bearish on Thursday and for the weeks’ range to extend to the downside for the Greenback during Thursday.

GBP/USD

Resistance 3: 1.9980/2.0000
Resistance 2: 1.9940/50
Resistance 1: 1.9900
Latest New York: 1.9845
Support 1: 1.9820/30
Support 2: 1.9800
Support 3: 1.99750

Rally yesterday was indeed a head-fake so far this next 24 hours. Offers are thick ahead of the 1.9980/2.0000 area again, stops said to be under the 1.9850 and 1.9820 areas today.

Comments
Rate back below the 1.9900 handle on the day; look for continued pressure back to the support zone around the 1.9750 area.

Stops likely to drive trade lower today and rate is making lows in early New York action. Close below the 1.9800 handle opens the door for a test of the 1.9700 handle.
Upside is limited in my view but ranges can be wide as evidenced by the past 48 hours of trade. Sell rallies if not short; buying dips dangerous in my view.

Aggressive traders can sell over the 1.9880 area during the day.

EUR/USD

Resistance 3: 1.6020/30
Resistance 2: 1.6000
Resistance 1: 1.5980
Latest New York: 1.5940
Support 1: 1.5920/30
Support 2: 1.5900
Support 3: 1.5880

Rhetoric from ECB to remain hawkish, Wednesday German manufacturing news, Thursday IFO.

4-22-08 SHORT EURO/USD 1.6000 Stops @ 1.6100
Hold and look to add on a close below 1.5900 area

Comments
Market is failing at resistance, be patient on the potential break

Overhead resistance is heavy above the 1.5980 area; traders say offers extend into the 1.6000/30 area with stops above.

Looking for a “first through the even” scenario; a strong long-liquidation break is coming and aggressive traders can look to sell into a sharp rise.

Sell zones today are 1.5980, 1.6000, 1.6020; buy zones 1.5850, 1.5830, 1.5800

Watch for two-way volatility; expect a sell signal on the hourly charts. Hook reversal still valid. Be ready to add quickly if this rally fails.

USD/JPY

Resistance 3: 104.00/10
Resistance 2: 103.80
Resistance 1: 103.50/60
Latest New York: 103.05
Support 1: 102.70
Support 2: 102.40/50
Support 3: 102.20

Yuan still marching higher taking the Yen with it.

04-21-08 SHORT USD/JPY 103.60/80 Stops @ 104.80
Look to ADD Wednesday/Thursday on a close under the 102.50 area.

Comments
Drop under the 103.00 area still labored as conditions are thin.

Traders note that the market is still trading technically and expect stops to be run in both directions near-term; expect some volatility. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time-frame.

Need a close back under the 50 bar MA today before the start of Tokyo, REALLY making us wait for it.

Balance of trade number no factor overnight Tuesday; close under 103.00 likely to attract more selling.

USD/CHF

Resistance 3: 1.0180
Resistance 2: 1.0140/50
Resistance 1: 1.0100
Latest New York: 1.0087
Support 1: 1.0050
Support 2: 1.0010/20
Support 3: .9980

If short from 1.0180/1.0200 area hold and look to ADD on a close below the 1.0050 area today.

2-22-08 SHORT 1.0030 Stop @ 1.0130

Comments
Rate still two-way and consolidating, waiting for US housing data tomorrow most likely. Stops a risk above the 101.40/50 area; also under the .9950 area

look for a test of the lower portion on the range within 48 hours (Wednesday AM)

Expect a bounce from .9950 so OK to cover shorts and go long from that zone. Be nimble though as a break below there likely to draw aggressive selling.

No follow-through is to be respected; look for inside range day closing higher tomorrow 4-22-08 with no action over the 1.0140/50 area.

ADD on the close 4-22-08; should be Short 1.0180 Stop @ 1.0280, more on at 1.0030 Tuesday.

USD/CAD

Resistance 3: 1.0220
Resistance 2: 1.0200
Resistance 1: 1.0160
Latest New York: 1.0122
Support 1: 1.0070
Support 2: 1.0020/30
Support 3: 1.0000/.9990

04-21-08 SELL 1.0060 Stops @ 1.0160

BOC cuts rates 50 BP; slightly surprises market.

Stop was missed; OK to ADD on further weakness.

Comments
Sell signal overnight, OK to hold through the close as stops are out of range from last week. Close below 1.0000 sets up break into the bottom of the range in my view.
Massive head-fake on the news this morning but rate misses our stop; OK to ADD more on a break of the 1.0000 handle

Tested downside for light support at the 50 bar MA,

Nothing to do but continue to wait in my view.

Analysis by: Forexpros.com 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.