Forexpros.com Daily Analysis - 05/03/2009

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Today’s US Dollar Trading

• USD gives back gains, off highs into the close
• Volumes up, stops noted in-range
• USD/JPY firm, likely response to firm equities


Overnight Preview

• Look for the USD to weaken overnight


Looking Ahead to Thursday
All times Eastern (-5 GMT)
• 8:30am USD Unemployment Claims
• 8:30am USD Revised Nonfarm Productivity q/q
• 8:30am USD Revised Unit Labor Costs q/q
• 10:00am USD FOMC Member Kohn Speaks
• 10:00am USD Factory Orders m/m
• 10:00am USD Treasury Sec Geithner Speaks
• 10:30am USD Natural Gas Storage
• 12:45pm USD FOMC Member Lockhart Speaks


Summary
Amid a backdrop of better equities and a much-needed correction the USD is giving back gains against all major pairs except the JPY this afternoon; traders note that volumes have picked up a bit suggesting that short and long term players both may be adjusting positions and/or liquidating USD longs. USD is making lows in post-London fix action against CAD, CHF and EURO so far into late New York while JPY is holding above 98.00 and GBP is holding 1.4150 area. After an aggressive rally by USD overnight the Greenback has more-or-less reversed as overseas news suggests that China may be in a faster position to lead the recovery in world economic trade. Oil prices have rallied as well putting commodities on the offense as traders re-think the “global meltdown” in consumables. Copper at a three month high is significant as well as China is the largest consumer of copper at this point. GBP failed to extend early gains above the 1.4171 high print in late New York but is holding .4150 area in solid two-way action. Stops noted above the 1.4100/20 area helping to boost prices as well as lifting EURO. EURO extending gains intraday as highs above 1.2600 found stops above 1.2620 and 1.2640 for a high print at 1.2654 in late New York; traders note supply is well offered but mention that large bids on the dip earlier into lows may have been long-term accounts suggesting offers may be late sellers. Additionally, a close above the 1.2630 area argues for a reversal pattern off the traded lows overnight. USD JPY continues to consolidate gains above the 99.00 handle with high prints at 99.49 defended by option players. Forex traders expect further gains to the 200 day MA at 100.10/20 area but a hug clue that a top may finally be in was model and momentum accounts on the bid likely adding to open longs above the 99.00 handle today some traders report; a correction to wash-out late longs back to the low 97.00 handle would still be a bull market according to chart-watchers. USD/CHF failed to hold the 1.1800 handle as expected dropping from high prints at 1.1850 to make lows at 1.1703 in New York, trader’s note that stops in size are likely under the 1.1680 area now and expect at least a test of that area. USD/CAD has reversed from overnight highs of 1.2970 to make lows in late New York at 1.2724 making for an inverted hammer from the well-defended 1.3000 area; falling back from the weekly opening range stops likely drove trade lower suggesting long-liquidation from momentum players based on February’s close. In my view, the USD is continuing to set-up for a reversal and today’s action will need to be confirmed by end-of-week; I think a sharp liquidating break would discourage enough of the bulls that a top for the rest of the month will be in. Look for the USD to lose more ground overnight but continue to expect two-way action after today’s one-way move lower into the close. Tomorrow’s ECB and BOE rate announcements are likely factored into pricing so don’t expect much of a break in GBP or EURO.


GBP USD Daily

Resistance 3: 1.4380
Resistance 2: 1.4300/10
Resistance 1: 1.4250
Latest New York: 1.4176
Support 1: 1.4020/30
Support 2: 1.3950
Support 3: 1.3900


Comments
Rate advances above yesterday’s highs and finds light stops close to the market. Highs in New York likely to extend overnight. Low prints at 1.3983 make a double bottom from yesterday; still above major bids said to be around 1.3950 area. Shorts are gaining confidence for a break under 1.4000 but support appears firm at this point. Rally to clear close in stops above 1.4300 and a close over the handle suggest more upside and a short-squeeze; bounce off the lows back to 1.4080/90 area suggests bids are increasing. Close back above the 1.4150 area suggests a test of offers at 1.4250 area. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term but stops are building above and the 1.5000 handle is a big psychological number. 23 year lows are very likely to hold on any break with initial support now at 1.3900 in play. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom.
Data due Thursday: All times EASTERN (-5 GMT)
5th-6th GBP Halifax HPI m/m
Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate


EUR USD Daily

Resistance 3: 1.2780
Resistance 2: 1.2720
Resistance 1: 1.2680
Latest New York: 1.2642
Support 1: 1.2450/60
Support 2: 1.2420
Support 3: 1.2380


Comments
Rate follows GBP higher after bouncing off low prints this morning. Stops building on both sides as the rate tests for stops on the downside first. Upside stops likely cleared at 1.2630/50 area for now; likely layered above 1.2680 through 1.2750 area now. Key 1.3030 area likely next; failure to hold 1.2900 likely going to be the test for the bulls this week. Close above key 1.3030 area needed for further upside until then rallies likely to be sold so expect more two-way action. Bulls are still attempting to find a bottom. 100 day MA falling to key resistance area of 1.3030 area by next week likely to add to overhead resistance. . Forex Signals around the 1.2920/50 area now likely to offer resistance so expect two-way action and consolidation underneath.
Data due Thursday: All times EASTERN (-5 GMT)
2:00am EUR German Retail Sales m/m
5:00am EUR Revised GDP q/q
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference

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 Alan Jankovsky

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