Forexpros Daily Analysis - 08/05/08

Read the Daily Forex Trading Analysis


Today’s US Dollar Trading

• USD firms, sideways after Housing Data
• Pending Home Sales as expected
• Speculation BOE might cut rates Thursday

Overnight Preview

• Look for book-squaring ahead of BOE meeting

Looking Ahead to Thursday
All times EASTERN (-5 GMT)
• 8:30am USD Unemployment Claims forecast 370K
• 10:00am USD Wholesale Inventories m/m forecast 0.5%
• BOE MPC Rate Announcement no change forecasted

Summary
The USD has had a strong Forex Trading day after another slow start in Asia overnight. Equities softened which kept some pressure on the USD/JPY pair but the Greenback was able to stay on the offensive against most of the pairs throughout the day. Cable broke hard on poor UK data and speculation that a rate cut is coming from the BOE MPC tomorrow; highs at 1.9740 in Asia were never challenged and once the rate broke back through the New York lows form Tuesday stops drove the rate lower until active selling added additional weight. Low prints in early New York at 1.9501 making a show for big stops said to be under the 1.9400 handle but the rate firmed and by afternoon was trading back above the 1.9530 area. USD/CAD tested lows at parity again overnight but was unable to attract additional selling. High prices for gold and oil continue to pressure the rate as the Loonie is seen gaining against the USD while oil remains on the offense. Look for that rate to test the 1.0050/60 area again overnight but to fail as this is previous support area now working as resistance. EURO fell through stops again under the 1.5500 handle overnight and made a show for the support area at 1.5350; low prints at 1.5365 attracted a bit of short-covering but the rate is still weak at the 1.5400 handle. If you are holding shorts in the EURO you have reached a technical objective from the reversal at the 1.6000 handle. It might be wise to lighten up a bit on your shorts and wait for a correction higher to add again. With the BOE meeting tomorrow any “surprises” might rally the pair back to test the 1.5500 handle easily; banking some of the gain might be advisable. In my view the USD has had a great rally to test S/R across the board but today’s data and what is to come still don’t build a case for a strengthening USD long-term. I see today’s strength as a chance to book gains on some positions; aggressive traders can get long the majors short-term if you wish.

GBP/USD Daily

Resistance 3: 1.99680
Resistance 2: 1.9620/30
Resistance 1: 1.9580
Latest New York: 1.9535
Support 1: 1.9500
Support 2: 1.9480
Support 3: 1.9450

Comments
Rate falls through 1.9650 support area and stops drive trade lower, support at 1.9500 area now in play. Bounce likely from here. Look for a re-test of the 1.9600 area within 24 hours; likely after the news Thursday from BOE; failed to rally after the fix today. Close under the 1.9700 handle today likely washed out longs; shorts will cover before the weekend. Bounce back to trade at or near the 1.9720 area by the end of the week suggests a rally is coming. Upside remains limited in my view but ranges can be wide as evidenced by the past few days of trade. Sell rallies if not short; buying dips dangerous.
Closes over the MA’s likely not to last so a rally over the 100 bar MA a good sell in my view. Some pressure from EURO remains. Cross-spreading for Yen, Swissy and EURO evident.

Data due Thursday: All times EASTERN (-5 GMT)

Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate 5.00%


EUR/USD Daily

Resistance 3: 1.5580
Resistance 2: 1.5550/60
Resistance 1: 1.5500
Latest New York: 1.5432
Support 1: 1.5400/10
Support 2: 1.5380
Support 3: 1.5350

Comments
Two-way action overnight again but break under 1.5450 area on stops suggests more losses are coming; bounce likely first. Support at 1.5365 as expected and the rate rallied hard within 24 hours last time at this number. Look for rotation higher next 24 hours. Rate clears close in stops again and attracts active selling below the 1.5500 handle. Strong long-liquidation break is still coming; test of the lows as expected. Watch for two-way volatility. Be ready to add quickly if a rally happens; look for a short-covering rally to stall around the 1.5550/1.5600 area again; look to re-short in that area; missed it yesterday.

Data due Thursday: All times EASTERN (-5 GMT)

2:00am EUR German Trade Balance 16.9B
6:00am EUR German Industrial Production m/m -0.5%
7:45am EUR Minimum Bid Rate 4.00%

8:30am EUR ECB Press Conference

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.