Forexpros.com Daily Analysis - 19/09/2008

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Today’s US Dollar Trading

• US data benign, no help to the USD
• Capital infusion seems to calm the markets
• Volumes fair

Overnight Preview

• Look for book squaring
• USD to consolidate

Looking Ahead to Friday
All times EASTERN (-4 GMT)
• NONE in the US

Summary
The USD continued to suffer selling pressure today as concern for the health of the US financial system continues. Traders note that volumes were lighter and at times thinner but for the most part orderly. Most pairs suffered volatility across the board as traders looked to non-USD pairs and risk aversion to balance portfolios. Leading the pack was the Yen continuing to gain on cross-spreading and carry trades; high prints in USD/JPY were sold aggressively helping the pair down to a new low on the day at 103.97 before seeing solid bids underneath. The rate closes out New York around the 104.50 area after trying for a top above the 105.00 handle. Swissy suffered a rout across the board as Gold climbed back near the $900 handle; lows in the rate at 1.0899 went unchallenged during late trade but the pair finishes in the bottom of the range at the 1.0980 after highs above the 1.1100 handle. Traders note that re-balancing of portfolios likely caused the rush to safe-haven buying. GBP continued to advance holding above the 1.8200 handle for a high print earlier in the day at 1.8279; traders note that rumors of a BOE rate cut coming soon have been trashed and the rate continues to trade in sympathy with EURO. EURO climbed to a new weekly high at the 1.4542 high print but drew offers on technical selling; traders note volumes were fair and the rate is expected to build on the recent strength for a try at the 1.4600 handle near-term. Across the board as equities whipsawed and Oil whipsawed traders kept an eye out for more Fed action to help with the crisis in the financial sector. A large cash-infusion overnight from the G10 CB’s helped quiet fears of an outright meltdown but the good news is that the worst of the storm is past for now. Cash liquidity has stabilized most markets with the USD appearing to suffer slightly in the process. With the new credit changes and the liquidity offered it appears that the USD will likely continue to trade sideways in a large range. Confidence will likely take longer to develop leaving the USD vulnerable to further declines. No news on the block for tomorrow suggesting that if there is a rally in the Greenback it will be to square books ahead of the weekend. Expect the majors to drop a bit to end the week but additional advances are likely next week.


GBP/USD Daily

Resistance 3: 1.8350
Resistance 2: 1.8300/10
Resistance 1: 1.8270/80
Latest New York: 1.8131
Support 1: 1.8080
Support 2: 1.8020/30
Support 3: 1.7980

Comments
Rate continues rally, cross spreading also noted. Late sell-off due to equities rally. Possible sovereign interest under the 1.8150 area this morning; some stops above the 1.8150 area. In my view, the GBP has weathered the storm fairly well and it suggests no additional down move near-term. Cross spreaders seen active on the sell side but volumes lighter. OK to buy the rate the next 24 hours and I would look for a dip under the 1.7830 area for the buy but that looks unlikely after the rally has extended late week. Traders note stops mixed with offers above the market also. Major support has held last Friday, any weakness likely to be bought hard. Profit-taking bids continue as well. Hook reversal from the toolbox still valid. Short-covering rally may be over due to sharpness of the move. Close back above the 1.8100 area likely turns the rate positive.
Data due Friday: All times EASTERN (-4 GMT)


EURO/USD Daily

Resistance 3: 1.4610/20
Resistance 2: 1.4580
Resistance 1: 1.4540/50
Latest New York: 1.4297
Support 1: 1.4250
Support 2: 1.4180

Support 3: 1.4080


Comments
Rate rallies away from support, some upside drawn from Cable no doubt. Late break again likely from equities rally. Expect more two-way action but the next dip could be larger after rally extends late week. Traders note the rate is firm on dips so far despite the uncertainty in the market. Some sympathy trade from GBP; volumes better during the day in Asia. Traders report offers in size being absorbed. Traders suggesting that the rate is trading technically. Market likely beginning to correct oversold condition with this rally; close over the 1.4500 area can’t be ruled out this week. Rate continues to track Cable and vice-versa. Remaining US data this week likely to be unfriendly so be ready for more whipsaw but expect a solid higher close for the week. If long, look to add to positions on any weakness. Likely a dip back to the 1.4200 handle will offer a solid buy opportunity.
Data due Friday: All times EASTERN (-4 GMT)
2:00am EUR German PPI m/m

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