Forexpros.com Daily Analysis - 31/07/2008
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Today’s US Dollar Trading
• USD extends range a bit
• Two-way action portends more correction
• Volumes moderate
Overnight Preview
• Look for a very quiet session overnight
• Waiting on US GDP tomorrow
Looking Ahead
All times EASTERN (-5 GMT)
• 8:30am USD Advance GDP q/q
• 8:30am USD Advance GDP Price Index q/q
• 8:30am USD Employment Cost Index q/q
• 8:30am USD Unemployment Claims
• 9:45am USD Chicago Business Barometer
• 10:35am USD Natural Gas Storage
• 1:00pm USD Treasury Sec Paulson Speaks
Summary
An uneventful day for the USD today despite the release of ADP private payroll data which came in higher-than-expected. Forecasting good news on the employment front traders took this morning’s data as a positive for the USD and lifted the Greenback to the best levels of the week so far extending gains seen yesterday. The advance was short-lived as the majors reversed off the lows and returned to the upper end of their past 24 hour ranges; Cable holding firmly to gains over the 1.9800 handle after a low print at 1.9743. Forex traders report good buying from semi-official names helping to support into the end of New York. EURO dipping down into new lows supported by Fib defense in the low 1.5500 handle; low prints at 1.5521 before bouncing into the 1.5580 area; traders suspect the worst may be over for the EURO after holding the 1.5500 handle but volumes were light on the bounce. In my view the USD has simply extended the range near-term on late bids and will likely fall back to challenge the lows intraday again which I think will offer a buying opportunity. Technically the USD has not violated any significant S/R so far this week and more upside is possible after a corrective dip to wash out the late longs. USD/JPY and USD/CHF all traded into respective resistance making new monthly highs the past 24 hours. USD/CHF tagged the 1.0500 handle and now looks set to drop off. Aggressive traders should be short from above the 1.0500 handle today. Yen has significant offers above the market at the 108.30/50 area and it will take a lot of effort to break the rate over the 108.50 zone. If that happens traders report a huge interest to buy the breakout and run with it as it appears that will be a significant psychological change for the rate. In my view, the USD will retreat from current pricing and sketch out a broader trading range. I don’t think the USD has the structural fundamentals for a sustained rally against the rest of the world’s currencies; although a wide trading range is likely. Look for a quiet overnight session ahead of tomorrow’s GDP data early.
GBP/USD Daily
Resistance 3: 1.9920
Resistance 2: 1.9880
Resistance 1: 1.9850/60
Latest New York: 1.9805
Support 1: 1.9750/60
Support 2: 1.9720
Support 3: 1.9680
Comments
Past 12 hours has been consolidation. Nothing really happening but a light volume rally. Rate is two-way in sympathy with EURO. Look for lower action today with bid interest from semi-official names. Offers above the market mixed with stops from late shorts so be ready for whipsaw the next few days. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading.
Data due Thursday: All times EASTERN (-5 GMT)
2:00am GBP Nationwide HPI m/m
EUR/USD Daily
Resistance 3: 1.5700/10
Resistance 2: 1.5680
Resistance 1: 1.5620/30
Latest New York: 1.5567
Support 1: 1.5520/30
Support 2: 1.5500
Support 3: 1.5480
Comments
Low prints at MAJOR support; hard and fast break likely to encourage a round of short covering next day or two. Look to re-short later—OK to stay flat a bit as we just took a huge win from the short side. Continued trade under the 1.5700 area pressures buying signals; another low likely before a “dead cat bounce”. Rate continues to track Cable and vice-versa. Stops above the 1.5820 area likely back out of range for today after the drop this week. Now that stops are cleared a rotation higher is coming.
Data due Thursday: All times EASTERN (-5 GMT)
3:55am EUR German Unemployment Change
5:00am EUR CPI Flash Estimate y/y
5:00am EUR Italian Prelim CPI m/m
5:00am EUR Unemployment Rate
Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky.
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