Daily Forex Analysis

Today’s US Dollar Trading

• USD rallies a bit but still below recent highs
• Gives back some gains in late New York
• Volumes lower

Overnight Preview

• Look for USD to trade softer overnight
• Should get quiet ahead of US data in the morning

Looking Ahead to Thursday
All times EASTERN (-4 GMT)
• 8:30am USD Trade Balance
• 8:30am USD Import Prices m/m
• 8:30am USD Unemployment Claims
• 10:35am USD Natural Gas Storage
• 2:45pm USD FOMC Member Kohn Speaks


Summary
The USD continues to advance on low volumes and light stops as the EURO finds a new low for the week at 1.4011; Forex traders note that the Greenback appears ready to vault the 1.4000 area but sellers are getting scarce. With OPEC announcing production cuts and another hurricane bearing down on the US major energy hub, traders are disappointed the Oil market hasn’t rallied more than a few cents leaving EURO ready to try for lows. Although sentiment is bearish and prices have edged to a new 2008 low the single-currency is drawing light bids on the approach to 1.4000 area. GBP followed EURO lower for a low print at 1.7537, well off the weekly lows, suggesting that the GBP has more bid interest than EURO at this point. Cross spreading is evident as traders adjust positions ahead of US data due tomorrow. Aggressive traders can buy EURO on an attempt to make lows under the 1.4020 area. USD/JPY rallied off the 100 bar MA for a high print at 107.95 but offers capped the move under the 50 bar MA suggesting that the USD/JP is trading two-way and offering an opportunity to get short on rallies. Technical traders note that volumes have been light on the rally making for a potential whipsaw the next 24 hours. Swissy has rallied as well matching the recent weekly highs at 1.1370 high prints but the volume is low traders say. Loonie has also attempted to make a high close over the 1.0700 handle; high prints at 1.0746 but giving back a sizable amount into the close. Loonie looking for another close under the 1.0700 handle at 1.0690 area. As expected, the USD did in fact extend its range today but USD bears were disappointed that the move was a rally ahead of the London fix. In my view, the USD is really over-extended to the upside and the continuing lack of volume on the move higher combined with the retreat from the highs suggests that the USD is indeed topping. Further gains will likely be difficult with more USD-negative news due the next 48 hours; look for another two-way overnight session with the USD backing off slightly in Asia.


GBP/USD Daily

Resistance 3: 1.7800
Resistance 2: 1.7750/60
Resistance 1: 1.7700
Latest New York: 1.7549
Support 1: 1.7550/60
Support 2: 1.7510/20
Support 3: 1.7480


Comments
Rate two-way but firm on dips; traders note bids absorbing offers at a slightly higher area around 1.7550 zone. Traders note stops mixed with offers above the market also. Major support numbers still are coming into view. Profit-taking bids continue as well. Hook reversal from the toolbox still valid. Price drop likely over-extended on sympathy selling from EURO. Oil no doubt helping to drive trade but rate is becoming severely oversold. Drop is drawing profit-taking bids suggesting the bottom is finally trying to form near-term. Overdue for a short-covering rally. Likely an exhaustion drop. Close back above the 1.7780 area needed to take some of the pressure off. This stop-driven break is likely a head fake in my view. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading.
Data due Thursday: All times EASTERN (-4 GMT)
4:30am GBP BOE Inflation Attitudes
4:45am GBP MPC Treasury Committee Hearings


EURO/USD Daily

Resistance 3: 1.4280
Resistance 2: 1.4250
Resistance 1: 1.4220
Latest New York: 1.4029
Support 1: 1.4000/10
Support 2: 1.3960
Support 3: 1.3920/30


Comments
Rate makes new low on light volume and attempts to recover; short squeeze likely soon. Rate unable to advance as yet but dips are bid. Two-way trade and whipsaw result in increased volatility but still no breakout one way or the other. Traders note macro accounts selling the rate; most likely they are late. Stops suggesting bottom-picking is still being tried by early longs. Traders report offers in size being absorbed but whipsaw likely scared out both sides the past two days. Rally to high print on good volume but bottom still not secure. Likely stops rolled down to around the 1.4220 area now after new low yesterday. Likely an exhaustion drop as the rate is attracting professional buying. Rate is overdue for a short-squeeze. Traders suggesting that the rate is trading technically. Market is heavily short now so expect a rally. Rate continues to track Cable and vice-versa. Now that more stops are cleared a rotation higher is even more likely. US data this week likely to be unfriendly so be ready for more whipsaw.

Data due Thursday: All times EASTERN (-4 GMT)
2:00am EUR German WPI m/m
2:45am EUR French Final Non-Farm Payrolls q/q
4:00am EUR ECB Bulletin
2:00pm EUR ECB President Trichet Speaks

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

Also Check our Forex Brokers Section.

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.