Forexpros.com Daily Analysis - 09/10/2008

Daily Forex Trading Analysis

Today’s US Dollar Trading

• Traders remain unsure what rate cut means
• Volumes remain lighter
• “Sharp” buyers seen on both sides


Overnight Preview

• Look for more two-way action
• USD likely to cover a lot of the same ground twice


Looking Ahead to Thursday
All times EASTERN (-4 GMT)
• 8:30am USD Unemployment Claims
• 10:00am USD Wholesale Inventories m/m
• 10:35am USD Natural Gas Storage
• 1:30pm USD FOMC Member Stern Speaks
All Day for everybody G7 Meeting.


Summary
Volatility was the rule of the day today; equities were both sides of unchanged as was oil. The Greenback ended mixed on the day as investor confidence remains wary of recent developments on the banking front. The historic coordinated rate cut by the world’s major central banks has left traders with additional fundamentals to sort out and at this point most are confused as to what will be the result moving forward. Traders note that “sharp” buyers were seen on both sides of the USD today suggesting that more volatility and two-way action will likely be the case. On the day the GBP fell as cross-spreaders bought Yen and EURO for Sterling forcing non-USD pairs lower. Cable slipped under the 1.7300 handle for low prints on the day at 1.7260 before profit-taking bids were seen lifting the rate back over the 1.7300 handle.Forex Traders note that volumes still remain softer and that may have ex****bated the move lower; the close today under the previous low from yesterday leaves the GBP vulnerable to more technical selling in my view. Aggressive traders can look for a buy point the next 24 hours as the market is heavily oversold in my view. EURO rallied for a new weekly high at 1.3755 before profit-taking by early longs dropped the rate back into the 1.3670 area but the rate is closing near the weekly opening range suggesting more upside is likely to end the week. Traders note stops above the 1.3740 area suggesting that late shorts are attempting to sell rallies in the EURO. USD/JPY is sharply lower having dropped to a 98.58 low print over night before rallying back to trade above the 100.00 area; traders note stops at the 99.50 area on the way down twice today suggesting that in addition to profit-taking bids there is some interest in buying the sharp drop by intraday longs. USD/CHF is off the overnight highs by two full handles for a low print in late New York at 1.1210 before bouncing slightly to the 1.1250 area. Traders note stops under the 1.1270 area in size suggesting late longs were buying from Monday’s rally. In my view, the volatility is whipsawing traders and risk appetite is still low. In the long run the USD will suffer more losses as the underlying weakness in the economy becomes center-stage after the credit crisis is mitigated. Near term risk on the USD is to the upside in my view and aggressive traders need to look at the sell-side of the Greenback moving forward; although ranges may be larger. Look for the USD to whipsaw overnight as two-way trade continues and volumes remain light until traders can digest what the recent fundamentals mean moving forward.


GBP/USD Daily

Resistance 3: 1.8180
Resistance 2: 1.8050
Resistance 1: 1.7880
Latest New York: 1.7309
Support 1: 1.7260
Support 2: 1.7220
Support 3: 1.7200


Comments
Rate is lower in response to rate cut, dips likely to be bought. Hook reversal from yesterday negated late. Stopped out of both potential buy points today; aggressive traders can look to the buy side again the next 24 hours as the rate is oversold in my view. Volumes lighter after the open. Follow-on selling likely to attract short-covering on further weakness. Follow-on selling likely from technical’s and spillover from EURO likely to be lighter after EURO holds gains today. Look for a recovery back to the 1.8000 handle near term; two-way action likely to continue. Possible sovereign interest on the dip as semi-officials seen on dips in both EURO and GBP recently. Some stops triggered along with active selling; traders note profit-taking bids. Traders report cross-spreading for Sterling crosses likely driving the rate near-term.

Data due Thursday: All times EASTERN (-4 GMT)
4:30am GBP Trade Balance
Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate


EURO/USD Daily

Resistance 3: 1.3900/10
Resistance 2: 1.3880
Resistance 1: 1.3800/10
Latest New York: 1.3679
Support 1: 1.3540
Support 2: 1.3500
Support 3: 1.3450/60


Comments
Rate firmer on news, makes highs in New York late. OK to look at the buy side on weakness to the bottom of the range. Pullback to the 1.3400 handle this week on lighter volume. Rate is an absolute screaming buy in my view. Aggressive traders can buy anytime under the 1.3900 handle in my view. Traders note stops triggered on the way down along with technical selling. Oil weaker helps pressure also. Traders note stops building above the market but those likely remain out of range today; some triggered on the move over the 1.3740 area. Expect more two-way action with upside bias; traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market. Traders suggesting that the rate is continuing to trade technically. Traders note official names on the bid.

Data due Thursday: All times EASTERN (-4 GMT)
2:00am EUR German Trade Balance
2:00am EUR German WPI m/m
4:00am EUR ECB Monthly Bulletin
7:00pm EUR ECB President Trichet Speaks

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

Analysis Provided by: Forexpros.com - Written by Jason Van Jankovsky

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