Daily Analysis Thread

[ForexPros]

Overnight Asia/Europe

• USD opens mixed
• Firms into Europe
• Sovereign demand seen

Today’s Economic Reports
All times EASTERN (-5 GMT)
• None in the US
• Treasury Budget during the day

Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 08:30 Export Prices ex-ag
• 08:30 Import Prices ex-oil
• 08:30 Retail Sales forecast 0.0%
• 08:30 Retail Sales ex-auto forecast 0.5%
• 10:00 Business Inventories 0.3%

Summary
The USD is rallying back after Friday’s sell-off but action is quite choppy and volumes only modest. Overnight Asia saw the best levels on the day for most pairs and two-way chop and whipsaw is driving some traders to the sidelines. Technical trade is evident as S/R areas are testing in both directions and some pairs have seen stops run intraday so far this morning. Starting New York the USD is on the offensive against Yen and Swissy but losing ground against Cable; slightly better against EURO. Traders note that the Greenback is reacting to a US-positive WSJ article published in Asia overnight although rhetoric and fundamentals may not support the USD through the week. Trading to a low of 1.9441, cable rallied off the lows in European trade as better-than-expected UK PPI data muted the USD’s gains; high prints at 1.9605 are well shy of expected major offers so the rate may have more upside to go before strong selling is seen. EURO is marking time with mostly sell-side action overnight. Never challenging the opening range on the day at 1.5486 the rate broke down on active selling for a low print at 1.5365 before bouncing smartly to open New York within striking distance of the highs at 1.5440 area; traders note Asian sovereign buying as well as model-accounts on the bid. Aggressive traders can look to buy the dips as EURO likely has more upside to go in my view. USD/JPY continues to attract importer demand and rumors of semi-official names on the bid continue to underpin the pair. Low prints in Asia at 102.56 were enough for shorts to cover once the rate passed back through the 103.20 area lifting the rate to a high print at 104.00 ahead of New York; rate currently on the highs to start US trade. For the most part, stops were seen close-in in all pairs suggesting that the whipsaw will continue until the weak hands on both sides are cleaned out. Look for the USD to weaken at existing technical levels seen from last week. I would look to be a USD seller within the next 24-36 hours; a rally could easily be a low-volume affair by short-covering that would fit nicely with expected bearish fundamentals due starting Wednesday.

EUR/USD Daily
Resistance 3: 1.5600/10
Resistance 2: 1.5550
Resistance 1: 1.5490/1.5500
Latest New York: 1.5435
Support 1: 1.5380/90
Support 2: 1.535060
Support 3: 1.5300/10

Comments
Bounce is developing nicely, rally over the 1.5400 handle significant. Rate holds opening range on the fall-back; solid sign of no sellers left. Rally back from dip under the 1.5400 on stops suggests more losses are coming but a corrective bounce is needed (which is developing now) Support at 1.5280 is firm near-term. Look for rotation higher to continue into next week. Rate clears close in stops again. Strong long-liquidation break is still coming; Watch for two-way volatility. Be ready to re-short quickly when the rally ends, look for a short-covering rally to stall around the 1.5550/1.5600 area again; look to re-short in that area.
Data due Tuesday: All times EASTERN (-5 GMT)
Tentative EuroGroup Finance Ministers Meeting

USD/JPY Daily
Resistance 3: 104.80
Resistance 2: 10450/60
Resistance 1: 104.10/20
Latest New York: 103.90
Support 1: 102.50/60
Support 2: 102.00
Support 3: 101.80

Comments
Rally back from the Friday lows likely a Head-Fake; double –top has formed and a strong sell signal suggests a potential short is now confirmed at the 105.00/50 area again. Rate has broken trend line support. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally through Tuesday but fall harder into mid week. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Stops could be in size at the 102.50/80 area. Resistance at 104.80 area remains significant now and rallies should be sold.
Data due Tuesday: All times EASTERN (-5 GMT)
7:50pm CGPI y/y 3.6%
7:50pm Current Account 1.95T

Analysis by: Forexpros.com written by Jason Alan Jankovsky

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.

[ForexPros]

Today’s US Dollar Trading

• USD opens mixed, ends lower
• Technical levels hold gains in check
• Stops in range

Overnight Preview
• Look for two-way action to continue
• Technical trade likely

Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 08:30 Export Prices ex-ag
• 08:30 Import Prices ex-oil
• 08:30 Retail Sales forecast 0.0%
• 08:30 Retail Sales ex-auto forecast 0.5%
• 10:00 Business Inventories 0.3%
This data likely to be a non-event. Markets are really watching for the larger data due on Wednesday.

Summary
The USD is ending the day heavily mixed to start the week. Initially firmer in overnight Asia the Greenback gave back hard-won follow-on gains from European trade at previous S/R areas against most major pairs. Cable advanced on cross-spreading demand to post a high print in New York for the day at 1.9635 making the day an outside-range engulfing bar on the daily; a strong potential reversal signal from the two-month lows at 1.9441 earlier in the day. Although the trade was considered a strong signal the volumes were not impressive suggesting the rate will follow-through only modestly the next 24-36 hours. EURO rallied back to the potential sell-zone in the 1.5550 area for a high print at 1.5572 before dropping back a bit on the close. Traders note stops in range triggered on the rally over the 1.5450/60 area overnight; lows at 1.5365 went unchallenged in New York. Model account demand also seen suggesting that momentum traders are coming in on the buy side. Also active in USD/JPY, model traders likely had their stops too close to protect themselves against a reversal suggesting that the EURO and the Yen will whipsaw traders the next 24-36 hours. Look for a pullback in both pairs; EURO/JPY also active overnight suggesting the USD will remain under pressure against the Yen near-term. Highs in USD/JPY at 104.05 were offered rumored by semi-official names and the rate is off the highs to finish New York. For the most part, the Greenback had a solid two-way day against most of the majors and despite the two-way action is holding between established support and resistance. The GBP likely will follow-through to the upside a bit but sellers are expected to show at the 1.9680/1.9720 area. EURO has likely made the high for the week seeing as no real stops over the 1.5550 area were seen today and that is precisely where they would have been if shorts were active over the weekend; aggressive traders can look to ADD to open shorts in EURO at the 1.5550 area OB today and tomorrow. Looking ahead, expect technical trade to dominate ahead of Wednesday’s CPI data; Tuesday’s data likely no factor.

EURO/USD Daily
Resistance 3: 1.5600/10
Resistance 2: 1.5570/80
Resistance 1: 1.5550
Latest New York: 1.5535
Support 1: 1.5500/1.5490
Support 2: 1.5450
Support 3: 1.5400

Comments
Bounce is developing nicely, rally over the 1.5400 handle significant. Rate holds opening range on the fall-back; solid sign of no sellers left. Rally back from dip under the 1.5400 on stops suggests more losses are coming but a corrective bounce is needed (which is developing now) Support at 1.5280 is firm near-term. Look for rotation higher to end about now—the next 24-36 hours. Rate clears close in stops again. Strong long-liquidation break is still coming; Watch for two-way volatility. Short-covering rally stalled where expected in the 1.5550/1.5600 area again; look to re-short in that area now.
Data due Tuesday: All times EASTERN (-5 GMT)
Tentative EuroGroup Finance Ministers Meeting

USD/JPY Daily
Resistance 3: 104.80
Resistance 2: 10450/60
Resistance 1: 104.10/20
Latest New York: 103.92
Support 1: 102.50/60
Support 2: 102.00
Support 3: 101.80

Comments
Rally back from the Friday lows likely a Head-Fake; double –top has formed and a strong sell signal suggests a potential short is now confirmed at the 105.00/50 area again. Rate has broken trend line support. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally through Tuesday but fall harder into mid week; likely in the 10460/80 area. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Stops could be in size at the 102.50/80 area. Resistance at 104.80 area remains significant now and rallies should be sold.
Data due Tuesday: All times EASTERN (-5 GMT)
7:50pm CGPI y/y 3.6%
7:50pm Current Account 1.95T

Analysis by: Jason Alan Jankovsky

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.

[ForexPros]

Today’s US Dollar Trading

• USD extends rally during New York
• Flows described as light and disorderly

Overnight Preview
• Look for book-squaring
• USD may have gotten ahead of itself

Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
• 8:30am USD Core CPI m/m 0.2%
• 8:30am USD CPI m/m 0.3%
• 9:15am USD Fed Governor Kroszner Speaks
• 10:30am USD Crude Oil Inventories

Summary
The USD is higher to end New York after a volatile session after the release of US data. Although the Retail Sales data came in about as expected, upwardly revised data from last month sparked a swift rally in the greenback sending it to the best levels of the day. The USD managed to hold gains against the Yen and Swissy but gave back some gains against EURO and Cable to end the day; traders note that volumes were very patchy on the move and order-flow was sporadic and directionless despite the firm pricing. USD is likely setting up for a rotation lower and the technical picture looks a bit supportive of that view. Cable made a new monthly low at 1.9417 before rotating higher to eventually print 1.9496 for the New York high but well off the European high at 1.9589; traders note the reversal was unexpected after the release of higher than expected UK CPI data this morning. Cable settled around the 1.9450/60 area in quiet trade. EURO fell in sympathy with GBP as cross-spreaders lifted EURO off the post-data lows of 1.5429 and EURO gained the 1.5500 handle again before settling back as flows became confusing after the London Fix. Traders note that EURO appears to have found a near-term bottom and believe support is firm around the 1.5380/1.5400 area. The rate will likely draw some short-covering by late shorts this morning during the next 24 hours so expect a continued grind higher ahead of US data in the morning tomorrow. USD/JPY continued to grind higher all afternoon on light volume; making the high for the day ahead of the close at 104.93 touching the 100 bar MA in the process. Sellers said to have plenty of offers waiting at the 105.00 area and it will be important to see if those offers show up overnight in Japan this evening. Given the recent strength in the Yen this correction higher by the USD is likely to attract sellers and the key is how thick they are at this level. Aggressive traders can look for a short on any further USD strength in my view. Tomorrow is US CPI data and with the recent information tending to support the Fed is not done easing yet, I would expect that a weaker than expected number could ignite a bout of USD long-liquidation in the morning. The market seems prepared for that and recent strength despite weak volumes appears to be an opportunity to sell.

USD/JPY Daily
Resistance 3: 105.80
Resistance 2: 105.50
Resistance 1: 105.00/10
Latest New York: 104.72
Support 1: 104.20/30
Support 2: 104.00
Support 3: 103.80

Comments
Rally back from the Friday lows likely a Head-Fake; double –top has formed and a strong sell signal suggests a potential short is now confirmed at the 105.00/50 area again. Today’s test of the highs stalls on light volume just under the 100 bar MA. Late sell-off significant as longs likely threw in the towel. Stops above 104.30 area drove trade today; they are gone so look for the rate to rotate lower overnight. Rate has broken trend line support and Tuesday’s attempt to score a high over the 104.00 handle may be the test of the trend line break. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; some of which likely happened overnight Tuesday. Continue to expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally through Tuesday but fall harder into mid week; likely under the 103.00 handle. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Stops could be in size at the 102.50/80 area. Resistance at 104.80 area remains significant now and rallies should be sold.
Data due Wednesday: All times EASTERN (-5 GMT)
7:50pm JPY Core Machinery Orders m/m -5.2%

USD/CHF Daily
Resistance 3: 1.0610/20
Resistance 2: 1.0580
Resistance 1: 1.0550/60
Latest New York: 1.0524
Support 1: 1.0470/80
Support 2: 1.0410/20
Support 3: 1.0380

Comments
Rally overnight may be expected in sympathy with YEN and/or weaker commodities but upside appears limited. Pullback from 105.00 area gained some credibility as offers appear from big names traders say. Monday’s failure above the 1.0500 handle significant in my view. Likely this rally overnight Tuesday is testing the break-down; be ready to sell. Upside is limited and the volumes aren’t that great so far today again. Be nimble though as a break below 1.0380 likely to draw aggressive selling. Rate continues to attract dip buying; next dip will likely be bought around 1.0250 area again; but last three dips have failed to create significant rally. Failure last week at 1.0550/1.0600 area is setting up a short; look to sell the next rally; around 1.0500/20 I think. Highs above the 1.0500 area may keep the rate two-way action before a move in either direction. Close under the 1.0400 area sets up a loss to 1.0250 near-term.
Data due Wednesday: All times EASTERN (-5 GMT)
NONE

Analysis by: Jason Alan Jankovsky

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.

[ForexPros]

Today’s US Dollar Trading

•USD rallies ahead of News, lacks follow-through
•Majors on S/R volumes low
•Sovereign names seen selling USD
Overnight Preview
•A round of book-squaring likely

Looking Ahead to Thursday
All times EASTERN (-5 GMT)
•8:30am USD Empire State Business Conditions Index 0.1
•8:30am USD Unemployment Claims 370K
•9:00am USD TIC Net Long-Term Transactions 63.6B
•9:15am USD Capacity Utilization Rate 80.1%
•9:15am USD Industrial Production m/m -0.3%
•9:30am USD Fed Chairman Bernanke Speaks
•10:00am USD Philadelphia Fed Manufacturing Index -19.0
•1:00pm USD NAHB Housing Market Index 20
•7:00pm USD Fed Governor Mishkin Speaks

Summary
The USD rallied today after a slow start again in Asia helped by better equities pricing and model/momentum accounts buying; traders note that volumes were not impressive and the majors all held significant S/R. Initially two-way in Asia the Greenback went one-way on stops and aggressive buying near the start of European trade as reserve managers bought USD in the morning only to see the majors reverse after news; the USD sold off on the BOE inflation report but then recovered reversing ahead of US data. Today’s CPI data was softer-than-expected and the USD initially broke lower on the day but held existing overnight ranges. Settling back after the London Fix the USD continued to drift in quieter range-bound action with little news driving any of the pairs. Cable continued to hold the 1.9450 area that has held stops in both directions the past 72 hours; low prints at 1.9361 were bought by cross-spreaders and semi-official names traders say. Upside limited to the 1.9487 high but the rate has solid bids at the 1.9400 handle and slightly above. Traders are looking for the rate to hold the 2008 lows and a solid bounce is expected by the end of the week. EURO no less aggressive to the upside but continues to languish under the 1.5500 handle as traders say offers appear thick on the approach. Highs at 1.5487 were met with Swiss private bank sales some traders report; same names seen on the bid under the 1.5400 handle recently. Traders note sovereign demand in EURO at around the 1.5430 area and also in USD/JPY on the buy side. USD/JPY rallied into stops above the 104.80 area and again at 105.20 area for a high print at 105.46 but the rate is really struggling to hold gains and traders report volumes are light and flows patchy; heavy offers said to be around the 105.50 area and higher suggesting the rate is at or near a top. Swissy also encountering strong resistance under the 1.0600 handle; highs at 1.0601 were more symbolic than anything else. Traders are looking for the USD to pull back from here but the lack of selling interest is a concern for the shorts. In my view, the USD needed to give back some of these gains right away rather than hold firm as it has. Tomorrow is another day of important news so watch for book squaring overnight to temper the USD advance. A long-liquidation break is coming and when it does the Greenback could break sharply very quickly.

USD/JPY
Resistance 3: 106.00
Resistance 2: 105.80
Resistance 1: 105.50
Latest New York: 105.21
Support 1: 104.60
Support 2: 104.20/30
Support 3: 103.80

Comments
Rate makes one more high into resistance generating a strong sell signal. Look for the rate to fall on the news but intraday volatility likely. Double-top remains strong sell signal suggests resistance area is getting thicker. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; look for close-in stops under the 104.50 area today. Continue to expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally through Tuesday but fall harder into mid week; likely under the 103.00 handle. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Stops could be in size at the 102.50/80 area. Resistance at 105.50 area remains significant now and rallies should be sold. Traders looking for a struggle to get over the 105.50 area.
Data due Thursday: All times EASTERN (-5 GMT)
7:50pm JPY GDP q/q 0.6%
7:50pm JPY GDP Deflator y/y-1.5%

USD/CHF Daily
Resistance 3: 1.0700
Resistance 2: 1.0650
Resistance 1: 1.0600/10
Latest New York: 1.0552
Support 1: 1.0500/10
Support 2: 1.0450/60
Support 3: 1.0400/10

Comments
Rally overnight may be expected in sympathy with YEN but upside is labored; stalling at the 1.0600 handle significant. No follow-through after news this morning is a signal the top may be in. Pullback needed to confirm strong sell signal generated overnight. Monday’s failure above the 1.0500 handle still significant in my view. Likely this rally overnight is model and momentum accounts on the buy side. Upside is limited and the volumes aren’t that great so far today again. Be nimble though as a break below 1.0380 likely to draw aggressive selling. Rate continues to attract dip buying; next dip will likely be bought around 1.0400 area; but last three dips have failed to create significant rally. Close under the 1.0400 area sets up a loss to 1.0250 near-term.

Data due Thursday: All times EASTERN (-5 GMT)
1:45am CHF Consumer Climate
5:00am CHF SNB Board Member Jordan Speaks
Analysis by: Jason Alan Jankovsky

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.

[ForexPros]

USD sharply lower - Morning Session – GMT
Overnight Asia/Europe

•USD sharply lower
•German data surprises, EURO higher
•Cable breaks resistance, also higher
Today’s Economic Reports
All times EASTERN (-5 GMT)
•8:30am USD PPI m/m 0.4%
•8:30am USD Core PPI m/m 0.2%
•9:00am USD Fed Vice Chairman Kohn Speaks
•:00am USD IBD/TIPP Economic Optimism 38.0
Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
•10:30am Crude Oil Inventories 0.2M
•1:00pm Fed Governor Warsh Speaks
•2:00pm FOMC Meeting Minutes
Summary
The USD is sharply lower to start New York this morning; traders note German economic news and rhetoric from ECB’s Weber providing a lot of the push higher in EURO. Starting Asia firm the USD hovered around NY closing levels early and had a brief bout of buying but reserve manger selling was seen capping the highs for the day and the USD began a gradual slide through the European open. The big mover on the boards is EURO today breaking through several levels of recent resistance areas and finding stops above the market as well. Beginning the march higher was stronger-than-expected German PPI data marking the fourth month in a row PPI has been higher than expected. Comments from ECB council member Weber suggested that an interest rate hike can’t be ruled out this year sent traders scrambling to cover shorts. Stops were noted also on the break above the Monday highs at 1.5560/70 area with more above the 1.5600 and 1.5630 area; high prints were at 1.5675 and those after a brief retracement on German ZEW data. Additionally, ZEW President Franz said he agreed with Weber that an interest rate hike by the ECB is likely which sent the EURO rallying back to test the highs before a round of profit taking dropped the rate back to the 1.5640 area to start NY. Traders note Russian buys at the start of the session linked to rumors of Ruble revaluation but so far that is not confirmed. Cable followed EURO higher and scored a high print at 1.9670 before falling a bit into the start of NY; traders note that technical resistance comes in around the highs and up to the 1.9700/10 area and that may be it on the day. A surprise by US PPI this morning is likely to encourage a bout of USD selling but with the EURO and Cable above resistance already the worst may be in for the day. USD/JPY dropped under the 104.00 handle but so far stops under the 103.50 area are out of range. Swissy also under the 1.0400 handle briefly but stops again out of range. Today’s PPI will likely offer more volatility.

EURO/USD Daily

Resistance 3: 1.5730
Resistance 2: 1.5700
Resistance 1: 1.5670/80
Latest New York: 1.5645
Support 1: 1.5600
Support 2: 1.5550
Support 3: 1.5500

Comments
Overnight news suggests that the ECB will raise rates soon; traders caught wrong-footed and covered shorts hard. Stops noted above the 1.5630/40 area and the press to fresh highs at 1.5680 area likely to hold as resistance near-term. Today’s PPI data could ignite more buying if disappointing. The downside correction is likely over if a close is above the 1.5640 area today. Crude prices will likely continue offering a bit of volatility support on dips. Longs likely to have rolled up stops under the 1.5520 area so volatility possible. I would stay away from the short side for the rest of this week. The rate is setting up for a potential upside recovery. Bounce back from dip under the 1.5500 handle suggests active buying on dips; traders say lots of official and sovereign names seen buying dips. I think the recovery has some legs this time.
Data due Wednesday: All times EASTERN (-5 GMT)
4:00am EUR German Ifo Business Climate Index 102.1
4:00am EUR German Ifo Business Expectations Index 96.5

USD/JPY Daily

Resistance 3: 105.00
Resistance 2: 104.80
Resistance 1: 104.50/60
Latest New York: 104.12
Support 1: 103.70
Support 2: 103.50
Support 3: 103.20/30

Comments
Rate falls back after a weak rally in Asia; traders note that stops are building in size under the 103.50 area with bids layered below to 103.00 area. Stops said to be large enough to drive the rate through bids for a test of the 102.80 area. Failure to score the 105.00 handle very significant in my view. Upside will continue to be labored now in my view but be nimble on shorts; we need a solid close under the 103.80 area next. If PPI disappoints today, that may be in the works for this afternoon. Conviction of the sellers being challenged but I think the weak hands are the longs as the volumes are increasing on the breaks and lighter on the rallies. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; Day traders continue to get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Resistance at 104.80 area remains significant now and rallies should be sold.
Data due Wednesday: All times EASTERN (-5 GMT)
7:50pm JPY All Industries Activity Index m/m -0.2%
7:50pm JPY Trade Balance 0.79T
Analysis by: Jason Alan Jankovsky

[ForexPros]

Overnight Asia/Europe
•USD weakens further
•IFO better-than-expected
•MPC votes 8-1 to keep rates unchanged

Today’s Economic Reports
All times EASTERN (-5 GMT)
•10:30am Crude Oil Inventories 0.2M
•1:00pm Fed Governor Warsh Speaks
•2:00pm FOMC Meeting Minutes

Looking Ahead
All times EASTERN (-5 GMT)
•8:30am USD Unemployment Claims 373K
•9:00am USD Fed Governor Kroszner Speaks
•10:00am USD House Price Index m/m

Summary
The USD continues to weaken in Wednesday’s trade; starting softer in Asia in line with weaker equities pricing. Most of the Asian stock markets were lower overnight in sympathy with the losses seen in the DJIA Tuesday traders say; higher oil prices also dragging on the USD and lifting EURO. Overnight news was light but significant; the BOE MPC minutes showed an 8-1 split to leave rates unchanged with Blanchflower again voting for a 25 BP cut. Traders see the MPC holding rates firm in response to potential inflation pressures and the GBP firmed although still under the highs seen Tuesday; high prints at 1.9699 before selling was seen. Traders say the rate feels “heavy” this morning to start New York and cross spreaders are active in EURO-Sterling. EURO is higher in response to better-than-expected IFO data; high prints at 1.5775 saw profit-taking selling and stops mixed together. Initially weaker in Asia ahead of the news traders note that EURO has closed above important technical resistance in Asia making for a potential extended rally to develop. In my view the EURO has a retracement due before continuing to advance. With Oil prices topping $130 this morning it is hard to argue for a lower priced EURO for very long. USD/JPY is weaker but with two way action more evident. Traders note light stops above the 104.00 area are untouched overnight with high prints at 103.70 capped by exporter selling. Stops under the early lows at 103.40 area were finally found and the rate pressed for low prints at 103.04 before a bounce was seen. Analysts remind that technical support is under the 102.50 area leaving a lot of room for downside stops but I think the rate is due for a bounce. Look to add to open shorts on that bounce. Swissy and Loonie are now at technical downside objectives; aggressive traders can look for a long around current prices or slightly lower for Loonie. An upside correction for Swissy is due in my opinion and the strength of that correction will determine where to short. Aggressive traders can go long around the 1.0310 area
EURO/USD Daily

Resistance 3: 1.5850</SPAN>
Resistance 2: 1.5820
Resistance 1: 1.5770/80
Latest New York: 1.5758
Support 1: 1.5630
Support 2: 1.5580
Support 3: 1.5550

Comments
IFO rallies the pair higher but tech resistance at 1.5770/80 area holds to start New York. Close over the 50 bar MA likely to draw buyers but offers are absorbing so far. Overnight news suggests that confidence in the economy is continuing to grow and combined with higher Oil prices the rate is likely to be bought on dips. Look for support on dips near the 1.5550 area. Longs likely to have rolled up stops under the 1.5580 area so volatility possible. The rate is setting up for a potential upside recovery. Bounce back from dip under the 1.5500 handle suggests active buying on dips; traders say lots of official and sovereign names seen buying dips. I think the recovery has some legs this time but the late long may have made his move today.
Data due Thursday: All times EASTERN (-5 GMT)
5:00am EUR Industrial New Orders m/m -0.4%
USD/JPY Daily

</SPAN>

Resistance 3: 104.50
Resistance 2: 104.00/10
Resistance 1: 103.70/80
Latest New York: 103.38
Support 1: 103.00/10
Support 2: 102.80
Support 3: 102.50

Comments
Rate falls back after a weak rally in Asia; traders note that stops were building in size under the 103.50 area with bids layered below to 103.00 area. Overnight low and action played out that scenario and the rate is set to rotate higher. That push higher needs to stall at the 103.80 area again to stay short and ADD to position. Stops said to be large enough to drive the rate through bids for a test of the 102.80 area but bids apparently were big enough on the first try. Upside will continue to be labored now in my view but be nimble on shorts; we need a solid close under the 103.80 area next for the week after a brief corrective rally. Conviction of the sellers being challenged but I think the weak hands are the longs as the volumes are increasing on the breaks and lighter on the rallies. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; Day traders continue to get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Resistance at 104.80 area remains significant now and rallies should be sold.
Data due Thursday: All times EASTERN (-5 GMT)
7:50pm JPY Monetary Policy Meeting Minutes
In association with Forex Trading Edge

Analysis by: Jason Alan Jankovsky</SPAN>

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.

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[ForexPros]

Today’s Economic Reports
All times EASTERN (-5 GMT)
•8:30am USD Unemployment Claims 373K
•9:00am USD Fed Governor Kroszner Speaks
•10:00am USD House Price Index m/m
Looking Ahead to Friday
All times EASTERN (-5 GMT)
•10:00am USD Existing Home Sales 4.86M
•Half Day, markets close early
•No PM Broadcast or Newsletter, back on Tuesday after holiday
Summary
The Greenback opens New York mixed this morning after a solid two-way overnight session saw the majors consolidating recent strength. Initially starting flat in Asia the USD had some early pressure as follow-on selling from a dismal stock market Wednesday leaked into Asian trade. Bouncing back to post early highs at the start of European trade the USD found light stops in most pairs as late shorts were caught wrong-footed in Europe. Better-than-expected UK retail trade data and a well-received Gilts auction drew buying in Cable after trading the 1.9600 handle most of the day; stops were triggered above the 1.9720 area and the GBP steadily advanced for highs above the 1.9800 handle making the GBP the big mover on the board overnight. A surprise CBI survey caused a flurry of active buying as the market got short into the highs putting the GBP at 1.9819 high prints ahead of early NY trade; CBI the highest since 1995 making a case for no more BOE rate cuts. Traders note that the cross-spreaders were active in EURO-Sterling and Sterling-Yen overnight and they GBP has a very buoyant tone this morning. Contrasting that action is EURO which attracted sellers into the highs at 1.5815 as it tracked GBP higher, traders note prop accounts selling into the highs after stops drove the rate above the 1.5750 area in Europe. EURO has a “buy on dips” mentality today traders say and that means stops will be set close in; the rate could have a stop-driven sell-off to end the week and I would hold open shorts through the day. USD/JPY is firming to start NY after a brief dip to the 102.70 area; low prints at 102.72 on light volume in Asia. Traders note model accounts selling USD overnight and that means close-in stops as well likely in the 103.50 area; highs to start New York at 103.49 but offers are thin. In my view the USD is starting to make the turn for the rest of the week. The lows were in overnight and most of the positions we have on are working. The early short in GBP was stopped out overnight but aggressive traders can re-short the rate anywhere above the 1.9800 handle for today. With crude oil above $135.00 this morning it appears there could be some euphoria-demand for the European crosses so be sure to place your stops; anything can happen when emotional traders make their move. Look for equities to remain weak today and that might pressure USD/JPY.
EURO/USD Daily

Resistance 3: 1.5880
Resistance 2: 1.5850Resistance 1: 1.5820Latest New York: 1.5750Support 1: 1.5740Support 2: 1.5680Support 3: 1.5650


Comments
Irate rallies on stops but then falls back, close over the 50 bar MA likely to draw buyers but offers are absorbing so far. Higher Oil prices are underpinning and the first correction in Oil prices will likely take the EURO with it. “Buy on dips” mentality active which means stops will be rolled up in range and the potential for a stop-driven rally is high. Look for support on dips near the 1.5550 area. Longs likely to have rolled up stops under the 1.5650 today so volatility possible. Looking for selling pressure at the London fix today.
Data due Friday: All times EASTERN (-5 GMT)
2:45am EUR French Consumer Spending m/m 0.4%
3:30am EUR German Manufacturing PMI 53.3
3:30am EUR German Services PMI 54.0
4:00am EUR Manufacturing PMI 50.5
4:00am EUR Services PMI 51.7
5:00am EUR Italian GDP q/q 0.2%
USD/JPY Daily



Resistance 3: 104.50
Resistance 2: 104.00/10Resistance 1: 103.70/80Latest New York: 103.33Support 1: 102.80Support 2: 102.50Support 3: 102.20/30
Comments
Rate is firming up and the late sellers are likely in. Traders not model accounts buying USD in Asia so likely their stops will drive trade off the lows and into the 103.70 area near-term. Upside will continue to be labored but a retracement is coming. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; Day traders continue to get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Resistance at 104.80 area remains significant now and rallies should be sold.
Data due Friday: All times EASTERN (-5 GMT)

[ForexPros]

Today’s US Dollar Trading

• USD starts slow; makes a show for strength in NY
• US data mixed and of little help
• Traders await more tomorrow

Overnight Preview
• Look for a rally in the USD overnight
• Lack of downside follow-on selling seen

Looking Ahead
All times EASTERN (-5 GMT)
• 8:30am USD Core Durable Goods Orders m/m -0.4%
• 8:30am USD Durable Goods Orders m/m -1.5%
• 9:00pm USD Dallas Fed President Fisher Speaks
• 12:50pm USD Minneapolis Fed President Stern Speaks

Summary
The USD enjoyed a day of higher pricing but failed to break into any new areas of S/R against the majors. For the most part the Greenback remained inside established ranges but is showing signs of bottoming and very well may rally the next 24 hours. Today’s US data was a mixed bag and traders note that across the board the USD attracted a fairly large amount of bids relative to the volume on the day. Although the day was considered a scratch day by most the USD continued to firm into the close of New York trading. After a brief flurry of activity during the release of Housing Data this morning the rest of the day was uneventful but continued to lean on the bid side suggesting that late USD shorts have yet to be cleared if they were shorts set “on the news” as is typical for small-money accounts. Cable dropped to the low end of the range but was unable to score new lows in New York; overnight stop-driven lows at 1.9713 remained unchallenged into the New York close. Traders note that the rate is tracking EURO today and because EURO was under threat most of the session GBP held on the softer side. EURO made new lows for the day at the 1.5700 handle on the AM news but failed to attract size on the offer. The rally to the 1.5730 area was on light volume and the rate fell back to close near the 1.5720 area in thin trade. A low-volume day after a three-day weekend suggests that large traders are secure in their positions and haven’t made a move yet this week. USD/JPY has a big day ahead of itself tomorrow in my view as COT data suggests that the market is heavily short USD into the 104.20 area. Although large stops are still out of range it is very likely that the rate will try for highs within 24 hours as the lows today were bought hard enough to challenge the 104.20 area on three occasions today. Often that is a sign of a market looking to make a move. For the day—the USD trade remained technical in nature and the lack of follow-on selling suggests that the market has one push higher into resistance coming. Aggressive traders need to be ready to sell the USD on a spike higher and tomorrow’s action likely to give us a point of reference in at least two-pairs: 104.80 area in USD/JPY and 1.5650 area in EURO/USD. Look for US news to increase volatility but for the pairs to stall at previous S/R during the London fix tomorrow.

EURO/USD Daily

Resistance 3: 1.5880
Resistance 2: 1.5850
Resistance 1: 1.5810/20
Latest New York: 1.5699
Support 1: 1.5700/1.5690
Support 2: 1.5650
Support 3: 1.5600

Comments
Rate holds inside range so far for the day but is evidently starting the week a bit softer. Overhead resistance appears firmer on the approach to the 1.5800/20 area with stops said to be out of range above around the 1.5850 area. Traders note that the rate feels “heavy” to start the week and warn of a potential overhang of stale longs. Stops under the 1.5700 area are said to be in size and bids ahead are from larger names, Lack of volume a concern but no trouble attracting selling pressure today. Look for model and momentum accounts to be on the bid the next 24 hours and should that be the case the rate is due for a break lower. Adding to the potential is the COT data showing a flip to net long from net short before the holiday. A washout is likely in my view.

Data due Wednesday: All times EASTERN (-5 GMT)
2:00am EUR German Import Price Index m/m 0.6%
4:00am EUR Current Account 4.3B
Tentative EUR German CPI m/m (p) 0.3%

USD/JPY Daily
Resistance 3: 105.00/10
Resistance 2: 104.80
Resistance 1: 104.40/50
Latest New York: 104.24
Support 1: 103.20/30
Support 2: 103.00/102.90
Support 3: 102.50

Comments
Late rally shows upside bias still working. Rally into the 104.80 area is the best potential short area in my view. COT data showing an increase of net JPY longs making the upside potential for the USD a bit higher in my view. Stops above the 104.10/20 area likely to be in size and the question is how big are the offers ahead of 104.40? Stops the other side of 104.50 said to be in size suggesting that speculators got heavily short near current market pricing as 104.50 area is in range with the recent weekly highs. This week’s data may support near-term as the USD has had a lot of bad press the past quarter and has managed a firm start to the year; perhaps the Yen has a further downside correction to go before the USD bears are again out in force. If this weeks’ data is USD supportive then the rate has a pop higher into resting offers coming. Watch the upside volume for clues to the speed of the rally; if it is coming.
Data due Wednesday: All times EASTERN (-5 GMT)
Tentative JPY BOJ Governor Shirakawa Speaks
7:50pm JPY Retail Sales y/y 0.5%
7:50pm JPY Large Retailers' Sales y/y -1.1%

Analysis by: Jason Alan Jankovsky
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.

[ForexPros]

Today’s US Dollar Trading

• USD starts lower in Asia, rallies in Europe
• Rallies on Durables data then fades
• Ends New York Mixed

Overnight Preview
• Look for the USD to continue under pressure ahead of GDP tomorrow
• Volumes should drop off also

Looking Ahead
All times EASTERN (-5 GMT)
• 8:30am USD Prelim GDP q/q 0.9%
• 8:30am USD Prelim GDP Price Index q/q 2.6%
• 8:30am USD Unemployment Claims 370K
• 10:30am USD Crude Oil Inventories
• 10:30am USD Natural Gas Storage
• 2:30pm USD Fed Chairman Bernanke Speaks
• 7:00pm USD Fed Vice Chairman Kohn Speaks

Summary
The USD ends the day mixed after a slow start in Asia; initial early strength after Durable Goods data hit the street fades into the London Fix. The USD went nowhere after the fix and traders complained of low volumes, thin conditions and dull ranges. After the better-than-expected Durables data provided a solid rally the sellers came out at expected resistance and the USD never challenged those prices again all day making for a toppy chart formation. Model and Momentum accounts were seen in some pairs on the bid for USD suggesting that the potential top may actually be in place across the board. Some price action after the best levels of the day for the USD offer compelling reasons to stay on the short side through the end of the week. Cable advanced to the 1.9830 area overnight Asia only to be met with selling that found close-in stops at the 1.9770 area and below for a low print after durables at 1.9703; bids lifted the rate back over the 1.9800 handle to trade firm all day in less than two hours. A 100 point move in both directions whipsawing both sides to finish higher on the day; not a good sign for the bears. EURO also stopped short on support, holding the 1.5600 handle after a sharp stop-driven break for a low print at 1.5603 before sovereign names were seen on the bid. The 50 bar MA comes in as support at the 1.5661 and although a technical sign of potential slippage; the fact that the rate found no real stops in size on a break below the MA suggests that there is no one willing to sell under the 1.5660 area. Now that weak longs have been cleared, all the remains is to see if late shorts sold EURO into the hole today. Should that be the case; expect a rally the next 24-48 hours. USD/JPY rallied through stops and resistance for a high print at 105.33 clearing all the weak shorts out before dropping back to trade 104.60 area most of the afternoon. A very long selling wick on USD/JPY today suggests that the rate is due for a retest of the near-term lows under the 103.00 area; some desks report that selling interest at the highs was from exporters and semi-official names. Swissy had a similar day but finished off the highs and nowhere near the real resistance numbers the active bears would like to see. Highs at 1.0426 were never challenged and the rate fell back to under the 1.0390 breakdown number. A close below the 1.0390 area argues for a test of the 1.0280 area again as volumes on the rally were light. Look for a quiet evening ahead of GDP tomorrow.

EUR/USD Daily
Resistance 3: 1.5880
Resistance 2: 1.5850
Resistance 1: 1.5810/20
Latest New York: 1.5645
Support 1: 1.5620
Support 2: 1.5600/1.5590
Support 3: 1.5550

Comments
Rate crosses the 50 bar MA with higher volume; more losses on the way but move into the stops finds no one home; selling pressure likely not big enough now to move below the 1.5600 area easily. Support at 1.5550 likely to hold on further weakness. Overhead resistance appears firmer on the approach to the 1.5800/20 area with stops said to be out of range above around the 1.5850 area. Traders note that the rate feels “heavy” to start the week and warn of a potential overhang of stale longs; which may have been cleared on today’s dip to 1.5600. Stops under the 1.5700 area were in size overnight and volume was good. Look for model and momentum accounts active tonight—we need them on the offer as the break lower was negated by the bounce. Adding to the potential is the COT data showing a flip to net long from net short before the holiday; a washout is likely in my view and that may have been the move lower today.

Data due Thursday: All times EASTERN (-5 GMT)
3:55am EUR German Unemployment Change -25K
4:00am EUR M3 Money Supply y/y 10.3%
5:00am EUR Consumer Confidence -12

USD/JPY Daily

Resistance 3: 105.80
Resistance 2: 105.50
Resistance 1: 105.20/30
Latest New York: 104.62
Support 1: 104.20/30
Support 2: 103.80
Support 3: 103.20/30

Comments
Rate powers through offers at the 104.50 area and stops drive the rate to next resistance at the 104.80 area; fails at the highs. After US news is out this morning, expect a rally into the 105.10/20 area to be sold; we opened an aggressive short in that area today. Caution on the potential top is the rate closing over the 100 bar MA today. COT data showing an increase of net JPY longs making the upside potential for the USD a bit higher in my view; but that was likely the pop this morning. Stops the other side of 104.50 were in size suggesting that speculators got heavily short near current market pricing as 104.50 area is in range with the recent weekly highs. This week’s data may support near-term as the USD has had a lot of bad press the past quarter and has managed a firm start to the year; perhaps the Yen has a further downside correction to go before the USD bears are again out in force.

Data due Thursday: All times EASTERN (-5 GMT)
7:15pm JPY Manufacturing PMI 48.6
7:30pm JPY Core CPI y/y 1.0%
7:30pm JPY Core Tokyo CPI y/y 0.9%
7:30pm JPY Overall Household Spending y/y -0.7%
7:30pm JPY Unemployment Rate 3.9%
7:50pm JPY Industrial Production m/m

Analysis by: Jason Alan Jankovsky

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.

[ForexPros]

Overnight Asia/Europe

• USD mixed, volumes modest
• UK news disappoints Cable
• Technical trade overnight
Today’s Economic Reports
All times EASTERN (-5 GMT)
• 10:00am USD ISM Manufacturing Index
• 10:00am USD ISM Manufacturing Prices
• 10:00am USD Construction Spending m/m
Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 9:00am USD Fed Chairman Bernanke Speaks
• 10:00am USD Factory Orders m/m 0.0%
• Tentative USD Domestic Vehicle Sales 10.8M

Summary
The USD is starting the week mixed in New York this morning as overseas news drives early interest in the USD. Negative news in the UK prompted a strong selling day in the GBP today, Cable dropping to a low print at 1.9595 before attempting a recovery. Reports of traders increasing short sales of UK retailers’ stocks, negative press on Prime Minister Brown and reports that a large number of UK households have slipped into negative equity weighed on Sterling to start. Cross spreaders have had a great start to the week as the Sterling side of everything has pushed all the rates sharply higher. This has hurt EURO as the two pairs are tracking each other; EURO unable to extend gains from Friday and is trapped in the lower end of its early range; low prints at 1.5513 and highs at 1.5571 are making for dull trade. Good demand from Asian sovereign names was seen traders say around the opening range at 1.5550 area but offers from a well-respected German name capped the potential rally early. EURO trading right down the middle of the range in early New York at 1.5530 area. USD/JPY is slightly weaker with lows at 104.64; traders note stops on the break triggered at 104.90 area and the USD bulls are now on the defense. Asian volumes were lighter but the USD/JPY will likely remain on the defensive this week as no real news from the Japanese is seen as potentially market moving but US data due later will likely have an impact; look for the rate to continue to trade two-way with a lower bias for the week. If holding shorts in the rate look to add soon depending on the quality of the close today. Ideally, you would like a failed low-volume rally to sell into. Swissy continues to grind lower as well but has found some technical support overnight at the May daily pivot point at 1.0390; Monday’s low so far at 1.0389. Traders note that large stops are building in the 103.80/90 area suggesting that the late longs form last week are set to bail. Support is not heavy until the 1.0280 area and a hard break could be in the works there. In my view, the USD is set to resume its downward action this week. I would look for two-way action into the NFP data on Thursday with a break coming later in the week. For the most part the higher action against the GBP is a near-term “head fake” and not indicative of the overall market bias. Look for the EURO and GBP to recover higher by mid week.

GBP/USD Daily
Resistance 3: 1.9780
Resistance 2: 1.9720
Resistance 1: 1.9680
Latest New York: 1.9610
Support 1: 1.9600
Support 2: 1.9550
Support 3: 1.9520

Comments
Rate reverses hard again after strong rally on Friday, Rate likely to see support come in around the 1.9630 area but volatility could whipsaw from that area. Fundamentals still suggest a lower GBP and the failure to extend gains above the 1.9850 area so soon after Friday’s reversal argue for a continued downside after a bounce is possible. Continue to expect a lot of sympathy trade with EURO; the cross-spreaders are having a field day with the Sterling crosses and I think the GBP may track EURO near-term. Need a close below the 100 bar MA to build argument for the short but volatility is higher so expect a rally back to test the breakdown.
Not a lot to do but wait in my view.
Data due Tuesday: All times EASTERN (-5 GMT)
Tentative GBP Halifax House Price Index m/m -1.1%
4:30am GBP Construction PMI 45.7
7:01pm GBP Consumer Confidence Index 68

USD/CHF Daily

Resistance 3: 1.0550
Resistance 2: 1.0500/10
Resistance 1: 1.0480
Latest New York: 1.0422
Support 1: 1.0380
Support 2: 1.0350
Support 3: 1.0310/20

Comments
Rate weakens in early Asia and now remains two-way in light directionless trade. Traders say stops are likely building under the 103.80 area and a drop into lows mid-week is expected now that the rate failed again at the 1.0520 area. The late longs will have to bail if the rate slides back under the 1.0400 area; some of them likely out overnight. Look for rallies to be sold and the 104.80 area to hold key resistance on an upside rally. News this week is likely to remain non-eventful until NFP later. In my view, the rate needs to be sold on any strength; possible short at the 1.0450/60 area for today but that is a long-shot due to the trade under the 1.0400 area already.
Looking to re-short the next 24 hours—our stop just close enough today to tag us out.
Data due Tuesday: All times EASTERN (-5 GMT)
1:45am CHF CPI m/m 0.4%

Analysis by: Jason Alan Jankovsky

Disclaimer:
Trading Futures and