Daily Forex Analysis

Today’s US Dollar Trading

• USD two-way initially overnight
• USD data disappoints
• Ends USD mixed

Overnight Preview

• Traders look for consolidation and book-squaring
• No news is due so volatility possible

Looking Ahead

• Next week Durable Goods, Existing and New Home Sales, Michigan Sentiment

Summary
The USD ends New York mixed after a solid two-way forex trading day. Traders note that stops and USD short-covering were seen overnight and after the London fix; a short-squeeze in Cable also flushed weak hands and desks report that today’s action was not an expected reaction to the worse-than-expected Philly Fed data. Forecast at -14 the released number came in at -24.9 and was seen as further evidence the US economy is slipping into recession. Regardless of the debate the Greenback showed only a modest initial reaction preferring to remain within established overnight ranges until after the London Fix. Cable lead the complex higher as stops above the 1.9850/60 area and more at 1.9880 lifted the rate into the next level of resistance at the 1.9926 making today’s action in cable one of the largest ranges in the past few weeks; one trader made the observation “don’t try and make sense of it” when asked of the unexpected rally. A solid short-squeeze forcing out the longs is all it is and a reaction lower is likely ahead of Friday. EURO held up near the highs until comments from overseas cracked the amour of the bulls, falling into stops the rate pressed for lows at the 1.5850 area during New York but never testing the earlier lows under the 1.5800 handle Wednesday. EURO although firmer, is unlikely to rally significantly tomorrow as today’s break likely will encourage a round of long-liquidation from the nervous longs. USD/JPY held firm after the initial flurry of activity around the news; high prints came later at 102.73 challenging the resting offers said to be ahead of the 102.80/103.00 area. Traders note that across the board the USD had bids and offers in places where previous S/R was expected to contain but somehow was vaulted; apparently a lot of trade today was “unexpected” and that is pushing people to the sidelines a bit. Looking ahead to Friday no news is expected leaving the USD vulnerable to rhetoric-driven rally or breaks; if not on the right side today it’s OK to stay on the sidelines tomorrow. Forex Traders with shorts active in GBP likely stopped out so don’t rush back to the trade; tomorrow will likely end the week with volatility.

GBP/USD Daily

R3: 2.0000
R2: 1.9980
R1: 1.9950
Current Price: 1.9910
S1: 1.9880
S2: 1.9820/30
S3: 1.9780

Another “what the …..?” rally squeezes shorts hard triggering stops all the way past the comfort zone of the 100 bar MA. Now that the bids are erased there is little change of a follow-on rally without aggressive new buying and that is unlikely ahead of a weekend. Rate appears to be rallying on EURO-Sterling liquidation; not outright buying. Stops from longs likely in range from 1.9800 all the way to 1.9900 for the day-traders. Expect a fall-back soon, if stopped out—take a break. Next week is a new week.

USD/JPY Daily

R3: 103.20
R2: 103.00
R1: 102.80
Current Price: 102.59
S1: 102.20
S2: 102.00
S3: 101.80

Rate almost at resistance offered by the 50 bar MA; highs today still within established S/R of sideways range. No real action happened today despite the large rally; mostly stops and short-time frame traders some desks reporting. Look for follow-through buying to be limited and hold under the 103.00 area; a long-liquidating break is possible as profit taking hits the rate. Firmer stocks into the close today likely to give a boost in early Asia but don’t expect it to last.

Analysis by: Forexpros written by Jason Alan Jankovsky

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