Forexpros.com Daily Analysis - 02/07/2008
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Today’s US Dollar Trading
• ISM better than expected
• USD falls to support and then rallies
• EURO fails at resistance
Overnight Preview
• Look for the USD to consolidate in two-way action
Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
• 7:30am USD Challenger Job Cuts y/y
• 8:15am USD ADP Nonfarm Employment Change
• 10:00am USD Factory Orders m/m
• 10:30am USD Crude Oil Inventories
• 11:00am USD Treasury Sec Paulson Speaks
• 12:00pm USD FOMC Member Mishkin Speaks
Summary
The USD is firming into the New York close after remaining two-way all day; US data helped the Greenback a bit as it came in slightly positive. Firming stocks after the weakness early in the day a positive for some pairs as well. Excessive volatility worked against both sides today as most pairs were whipsawed over close to a 100 point range during the day. GBP failed to attracted bids after initially dropping to the 1.9930 area after the highs early in New York at 2.0009; a minor bounce to the 1.9960 area was sold and the rate dialed to hold gains finishing back near the 1.9930 area. Technically the GBP appears to be forming a top as volumes were light and the crosses are correcting lower on the GBP side. EURO had the highs challenged around mid-day after falling back from the 1.5820 area in the morning; lows were set at 1.5722 before a rally extended the highs above the 1.5820 high for another high print at 1.5828 before retreating; EURO dropped back to the 1.5780 area on the close and looks vulnerable to topping as well. Today’s ISM data helped the USD against the majors but was still considered benign, the two-way whipsaw against the GBP and EURO most likely due to oil volatility and equities pricing. USD/JPY held support at the 105.20/30 area with a low print at 105.22 before rallying all day to close back above the 106.00 handle; overnight highs at 106.40 likely to hold further offers with stops layered above. Forex traders note that the Yen crosses will likely drive near-term sentiment in USD/JPY as the US data due out this week is fairly well expected to be USD neutral to unfriendly. Tomorrow’s ADP private payrolls data is highly inaccurate and will likely create volatility but no real direction. The USD is likely to remain under upside bias until the Thursday NFP data but expect two-way action and a lot of whipsaw as the USD corrects higher back to near-term resistance. I would look for the Greenback to rally another two handles before the selling pressure comes on in force again. Expect two-way consolidation again overnight.
GBP/USD Daily
Resistance 3: 2.0080
Resistance 2: 2.0050
Resistance 1: 2.0000/10
Latest New York: 1.9941
Support 1: 1.9880
Support 2: 1.9820
Support 3: 1.9780
Comments
Rate softens during US trade slightly, US data slightly positive for the USD. Stops the main driver over the 1.9970/80 area with more over the 2.00 handle. Traders expect GBP to track EURO on a break. UK housing prices lower than expected had no effect; traders now expect a top to form as the rate had thinner volume on the rally into the reported option defense. Rate fails at high prints near previous resistance so a correction is still developing. Spillover weakness/strength from EURO still likely all week this week. Continue to expect a lot of cross-trading. US data today may create some whipsaw again.
Data due Wednesday: All times EASTERN (-5 GMT)
4:30am GBP Construction PMI
4:30am GBP Housing Equity Withdrawal q/q
EUR/USD Daily
Resistance 3: 1.5900
Resistance 2: 1.5880
Resistance 1: 1.5830/40
Latest New York: 1.5784
Support 1: 1.5720
Support 2: 1.5680
Support 3: 1.5650
Comments
Rate not supported by higher Oil again today suggesting a near-term top. Rally then breaks after attempted highs suggests some selling pressure is developing. Stops noted under the previous lows layered under 1.5700 traders say. Asian sovereign selling seen overnight; along with Swiss selling. US news today likely to create volatility so be ready for whipsaw or a reversal. Should cable break—EURO could go with it. Watch for model accounts on the bid today; those guys love to buy highs. The 50 bar MA likely to offer support should the rate fall back; bids will likely be in the 1.5580 area or so on any meaningful correction. Equities weaker also no help.
Data due Wednesday: All times EASTERN (-5 GMT)
3:15am EUR ECB President Trichet Speaks
5:00am EUR PPI m/m
Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky.
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