Overnight Asia/Europe
� USD two-sided, muted trade
� UK CPI surprises
� German ZEW surprises
Today�s Economic Reports
� 1:00 PM CST Treasury Budget, no factor
Looking Ahead
� Thursday Balance of Trade
� Friday TICS
Summary
The USD is trading in solid two-way action continuing to consolidate recent gains after starting mixed in Asia overnight. Largely tracking stocks the USD remained within Monday�s ranges and hovering around the New York close for most of the session, the majors had light volume as traders remained mostly sidelined ahead of European data. The Greenback suffered some selling after the release of the better-than-expected UK CPI numbers which showed less inflation potential. Cable had rallied along with EURO expecting a worse number and possibly some short covering. After the news the GBP took a hit leaving the highs at 1.9559 intact but pushing for lows at 1.9441; currently back at 1.9525 area to start New York. EURO is also two-way, first rallying to a high print at 1.4551 in response to the better-than-expected ZEW sentiment reading showing a gain for the first time in six months; then falling back as technical selling broke the rate back under the 1.4500 handle briefly. Currently the pair is 1.4525 area in quiet trade. Both EURO and GBP appear to be tracking each other in light volume with traders reporting that both pairs had close-in stops triggered creating the intraday volatility. Analysts remind that both pairs are showing signs of further potential for declines and warn that aggressive selling could take either rate to a new low this week; stops are likely being moved up closer underneath the recent lows. USD/JPY is firmer with traders reporting that equities continue to be the focus. Equities were flat in Asia but higher in Europe and are set to open modestly higher on Wall Street this morning; high prints so far in the rate at 107.26, lows at 106.78. Clearly USD/JPY is range-trading within established S/R and the coiling is continuing to store energy for a breakout. Light stops were reported in the pair at the 107.10 area which is very tight and almost an amateurish place to have them based on recent activity. In my view, the USD is set for another leg higher; aggressive traders can ADD to open EURO shorts at the 1.4550 area and ADD to open USD longs in USD/JPY on a close over the 107.60 area. It won�t take much for the USD to rally from current pricing as traders are increasingly nervous on the short side.
EURO/USD Daily
R3: 1.4620
R2: 1.4580
R1: 1.4550/60
Current Price: 1.4542
S1: 1.4500
S2: 1.4480
S3: 1.4460
Inside range day suggests point of indecision but volumes are very light; upside likely limited to R2 or R3. Stops likely above the 1.4560 area but offers are said to be resting and layered to 1.4620 area. Studies are turning bearish as rate drops into the 1.4400 handle suggesting that rallies are being sold. Aggressive traders can ADD to open shorts at 1.4550 area in my view. Look for the rate to continue two-way but look for rotation lower on higher volume.
USD/JPY Daily
R3: 107.80/90
R2: 107.50
R1: 107.20/30
Current Price: 107.12
S1: 106.80
S2: 106.60
S3: 106.40
Rate firming again after dipping into tech support at 106.80. If coiling is set to unload to the upside, the next dip should be on middle-volume but bought back quickly with a low print no lower than about the 106.40/50 area; stops under the 106.60 area should be light and overwhelmed by bids immediately. Close over the 107.20 area argues for another test of the 107.80 area; pullback from there should be brief with a re-test coming. Stops above the 108.00/10 area said to be �in size� Read: JUST HUGE
Jason Alan Jankovsky in Association with The Forex Edge
Publisher: ForexPros.com
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