Overnight Asia/Europe
� USD two-way and quiet in Asia, mixed in Europe
� Eurozone GDP better than expected; EURO slight lift
� Cable pushes into trend line resistance
Today�s Economic Reports
� 7:30 AM CST Balance of Trade forecast -60.5B
Looking Ahead
� 8:00 AM CST Friday TICS
Summary
The Greenback is starting New York mixed-to-weaker after a quiet overnight Asian session and a bit of downside pressure in early Europe. Although the Nikkei had a solid up day as did most Asian equities, the USD failed to build on its initial push higher yesterday into the 108.10 area. Traders note that Japan GDP came in a bit better than expected at +3.7% y/y giving the Yen a slight boost but the rate was unable to get above the 108.00 handle all day suggesting that the USD is well-bid at current levels. Cross-trading supported Cable as Russian demand for GBP/JPY and GBP/USD was seen during European trade. Cable is now at trend line resistance for USD and had completed near a 61.8% fib retracement of the recent range. Traders note that volumes were modest and stops were close in suggesting that early shorts were squeezed into the high prints at 1.9722; offers are said to be resting at 1.9740/50 area with stops layered above making upside a bit more labored. Eurozone GDP also came in a bit better at +2.3% y/y but the markets showed little reaction. Traders note that EURO has again made a show for the 1.4600 handle and found stops this time for a high print at 1.4634 before settling back to the 1.4615 area. Stops appear linked to CTA-type accounts and system accounts suggesting that shorts set yesterday were squeezed but volumes remain modest and traders are setting up for a push lower in EURO the next 24-48 hours. USD/JPY is firm at 108.20/30 area, high print overnight Europe at 108.44 before a bit of pressure was seen. Traders say option defense at 108.50 with exporter offers as well limiting the upside near-term but stops are rumored to be in size above the 108.50/60 area layered to 108.80; look for an explosive move should those stops get triggered. Today�s data could be mildly supportive for the USD. The trade deficit has been moderating as of the last few reports and anything under the forecast is likely to give the USD an upward bias. I think that the markets are expecting a boost for the Greenback and should stocks like today�s number you can expect another positive day on Wall Street to lift USD/JPY a bit. Tomorrow�s TICS data is also important but I wouldn�t look for any surprises, TICS has been covering the deficit well lately and there is no shortage of foreign buyers for US debt. Look for a two-way day ending better for the Greenback.
GBP/USD Daily
R3: 1.9800
R2: 1.9780
R1: 1.9720/30
Current Price: 1.9703
S1: 1.9650/60
S2: 1.9620
S3: 1.9580/1.9600
Rate continues the advance to next resistance level including trend line resistance and fib defense. Aggressive traders can SELL 1.9700 OB looking for a break lower as this rally fails. Volumes have been light on the rally suggesting that buyers may be setting up a bull-trap. Look for a long tail on the sell side for the end of day as US data may spook the bulls this morning. Stops under the market are likely close in also so should a dip gather momentum look for volumes to increase.
USD/JPY Daily
R3: 109.00
R2: 108.80
R1: 108.40/50
Current Price: 108.18
S1: 108.00
S2: 107.60
S3: 107.20/30
Rate stalls a bit after making a run for the stops resting above the 108.20 area; more said to be over the 108.50 area but offers contain for now. Traders note that exporters are active on the sell side. Volumes are modest but will likely increase on an attempt into the 108.50 area. Stops under the market likely close-in so a break may accelerate to test the 107.30 area of support but look for a long tail to confirm buyers are coming in on the dips. Close over the 108.50 area argues for a test of the 50 bar MA at 109.40/50
Analysis By: ForexPros.com
