Forexpros.com Daily Analysis - 09/07/2008

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Looking Ahead to Wednesday

All times EASTERN (-5 GMT)

10:35am USD Crude Oil Inventories

 

Light start to the week, traders watching G8 summit closely

 

 

Summary

The USD is stronger across the board after a weak start in Asia overnight; volumes have been light all day traders say and technical trade has been the rule. Staying mostly within established ranges the Greenback failed to extend strength with any conviction but rather remained within established recent ranges and covered a lot of the same ground twice. Making new lows after the London fix, EURO remained on the defense all day and fell to a low print at 1.5634 before seeing short-covering from weak shorts. Highs in the rate were an unimpressive 1.5740 making the EURO stuck near-term inside recent ranges. GBP fared a bit better for the bears with low prints at 1.9664 clearing stops under the 1.9700 area again; Forex traders note that cross-spreading for the Yen pairs kept the two-way action alive in Europe as whipsaw in most pairs forced out weak hands overnight. Both EURO and GBP again suffered from weak equities but shrugged off poor US housing data this morning. Dropping a larger than expected 4.7% Pending home sales created a brief flurry of activity but once that was out of the way the EURO and GBP settled into a slow grind lower until minor stops were hit and shorts covered into the break. Technical trade is expected again overnight and tomorrow leaving the majors vulnerable to another dip lower. USD/JPY stalled on the approach to the 107.50 area; high prints with light stops at 107.55 but traders say volumes on the move were almost nil. Option defense and offers are layered ahead of the 107.70/80 area suggesting that the top is in. Asian sovereigns were seen on the offer as well making the USD vulnerable at this level. USD/CHF benefited from cross-trade and general USD bids to score a high print at 1.0343 making for a double top on the daily charts. Again, volumes were light. In my view, a low volume rally into a significant technical area suggests that the majors will reverse again overnight; the question is when will the majors make a sharp move instead of range-trade? In my view, it would be a good idea for traders to consider shorting the USD on any additional strength the next 24 hours. US news due is not market moving in my view and the majors are trading technical. Look for a correction lower tomorrow in the greenback.

 

 

forex[/acronym]-technical-analysis/gbp-usd"]GBP/USD Daily

 

Resistance 3: 1.9900

Resistance 2: 1.9850

Resistance 1: 1.9820/30

Latest New York: 1.9694

Support 1: 1.9650/60

Support 2: 1.9600

Support 3: 1.9550

 

Comments

Rate remains inside buying wick from yesterday; following EURO lower. Strong sell signal active and aggressive traders can sell the rate on any strength. Bids around the 1.9660 area from “large names” cushioning the break; rally clears a lot of weak shorts as the week starts. Traders expect GBP to track EURO this week. Traders now expect a top to form as the rate had thinner volume on the rally into the reported option defense last week and overnight. Rate fails at high prints near previous resistance so a correction is still developing. Spillover weakness/strength from EURO still likely all week this week. Continue to expect a lot of cross-trading. G-8 data may create some whipsaw again.

 

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

 

4:30am GBP Trade Balance

5:30am GBP BRC Shop Price Index y/y

 

 

forex[/acronym]-technical-analysis/eur-usd"]EUR/USD Daily

 

Resistance 3: 1.5800/10

Resistance 2: 1.5780

Resistance 1: 1.5750/60

Latest New York: 1.5654

Support 1: 1.5630

Support 2: 1.5600/10

Support 3: 1.5580

 

Comments

Rate is failing to attract bids; offers increase on whipsaw after US data. Major support at the 1.5580 area and slightly below. Stops elected under the 1.5700 area but option defense reported at 1.5650 area. Highs were sold aggressively by Asian sovereigns again today traders say and it looks like they will attempt it again on additional strength. Stops noted under the previous lows layered under 1.5600 to 1.5550 traders say. Should cable break—EURO could go with it. The 50 bar MA likely to offer support should the rate fall back; bids will likely be in the 1.5580 area or so on any meaningful correction. Exponential reversal still valid. Looking for a sell on this strength.

 

 

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

 

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