Forexpros.com Daily Analysis - 09/06/08

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Daily Forex Trading Analysis

 

Overnight Asia/Europe

 

• USD mixed on follow-through

• Model accounts buying USD/JPY

• More losses expected later in the week

 

Today’s Economic Reports

All times EASTERN (-5 GMT)

• 10:00am USD Pending Home Sales m/m -1.0%

 

Looking Ahead to Tuesday

All times EASTERN (-5 GMT)

• 8:30am USD Trade Balance -58.2B

• 10:00am USD IBD/TIPP Economic Optimism

 

Summary

The USD is mixed to start New York this morning after trading two-way overnight. A minor holiday in Asia kept volumes light but the USD remained under pressure from Friday’s close. Importers were seen buying USD/JPY as concerns about higher commodity prices for raw materials, especially crude oil, kept manufacturers nervous to start the week. Model account demand was also seen and the USD/JPY traded to a high at 105.87 through European trade before settling back a bit as crude prices fell into late morning in Europe. Cross-spreading for Yen from Sterling and EURO helped support the USD a bit as well but traders note that the USD/JPY continues to trade higher despite weakness against other pairs and are cautious about shorts. EURO rallied on follow-through from Friday for a high print at 1.5845 but failed to take out a reported option barrier at 1.5850; traders expect the upside to be challenged through the 1.60 handle and advise buying dips. Higher-than-expected UK inflation data helped to fuel a rise in the GBP overnight; all measures of the data continued to point to high inflation y/y. High prints in the GBP were at 1.9796 and again cross-spreaders for Sterling-Yen helped to support the move. Swissy met the downside objective for the first break lower at the 1.0150 area; low print at 1.0147 before some profit taking by the shorts was seen. Forex traders note that the USD/CHF has made a technical breakdown on the daily charts and despite lower Gold prices than the last time USD was at this level more losses are expected. In my view, the two-way action seen overnight with the downside bias into technical objectives indicates that the Greenback is beginning to settle down from the panic seen late last week. I expect that pullbacks/rallies in the USD will be offered at previous technical levels and as long as the sentiment remains for a weaker US economy through the third quarter of 2008 I think we can expect to see the USD continue lower and test for 2008 lows. Last week’s sharp break is telling us something and we need to go with it. Look for the next rally in USD as a selling opportunity. Those who held the EURO longs into the objective should be flat now after having sold 1.5800 even. Look for more longs in EURO this week.

 

 

EUR/USD Daily

 

Resistance 3: 1.5900

Resistance 2: 1.5880

Resistance 1: 1.5850

Latest New York: 1.5789

Support 1: 1.5750/60

Support 2: 1.5720

Support 3: 1.5650/60

 

Comments

Stops and offers noted above the 1.5790/1.5800 areas, COT data showed an increase in EURO shorts through last week and those are likely cleared now. Liquidate longs into the 1.5800 handle—if you set a limit order and let it work over the weekend you were filled this morning. Trichet hints at a rate hike for July; sentiment changes rapidly and the rally last week has cemented that view I think. Overhead resistance appears firmer on the approach to the 1.5800/20 area which is a likely to offer upside resistance through Monday.

 

Data due Tuesday: All times EASTERN (-5 GMT)

 

2:45am EUR French Industrial Production m/m -0.8%

4:00am EUR Italian Industrial Production m/m -0.2%

 

 

USD/CHF Daily

 

Resistance 3: 1.0350

Resistance 2: 1.0300/10

Resistance 1: 1.0250/60

Latest New York: 1.0193

Support 1: 1.0180

Support 2: 1.0150

Support 3: 1.0110/20

 

Comments

“Doji” action early suggests the rate to finding bids; no doubt some are profit-taking from the shorts. Large stops elected under the 1.0350 area early in the break Friday; active selling found waves of stops suggesting the late longs got clipped hard. Rate closing under the 100 and 50 bar MA suggests more downside is coming—like a test of the monthly lows. Any rally likely to attract selling so be ready for a short. In my view, the rate needs to be sold on any strength.

 

Data due Tuesday: All times EASTERN (-5 GMT)

 

 

Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky

 

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