Forexpros.com Daily Analysis - 11/07/2008

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Overnight Asia/Europe

• Rumors spike the USD higher in Asia

• Stops and option barriers targeted in EURO

• Volumes moderate, maybe a bit larger than expected

 

Today’s Economic Reports

All times EASTERN (-5 GMT)

• 8:30am USD Trade Balance

• 8:30am USD Import Price Index m/m

• 9:55am USD Prelim U of M Consumer Sentiment

 

Looking Ahead to Monday

All times EASTERN (-5 GMT)

• No reports due on Monday

No real news until PPI on Tuesday

 

Summary

The USD was off to a quiet start in Asia last night as traders prepared for an uneventful overnight session ahead of US and European data. A brief flurry of USD strength was seen when rumors that the US Government may bail-out troubled Freddie Mac and Fanny Mae mortgage companies. The USD rallied to the best levels of the day quickly but as the rumor could not be confirmed the Greenback returned to pre-rally levels. Eurozone data was uninspiring as was UK data and both the EURO and the GBP remained contained to Asian ranges until the late European session. At the start of New York trade the Greenback came under selling pressure as French names were seen buying EURO for a Middle Eastern official; traders say stops and option barriers were targeted with the EURO making a high print at 1.5827 before dropping back under the 1.5800 handle. Traders also note that model accounts were on the bid over the 1.5800/10 area suggesting that a top might be in near-term. GBP followed EURO higher but offers were thick on the approach to 1.9800 handle and the rate could only manage a high at 1.9796 before dropping back. Stops for both pairs are likely in range but under the day’s lows so US data today may excite some fireworks. USD/JPY is a bit whippy this morning extending Asian highs to 107.31 before turning lower with other USD pressures for a low print at 106.89; all action still within recent ranges and a lot of two-way action appears on the board to end the week. No real news out of the Asian rim the past few days and the rate appears to be drifting a bit with most action contained to cross-spreaders who are content with current ranges. USD/CHF has been two-way as well overnight; high prints at 1.0306 with lows at 1.0242; a new weekly low but bids were waiting ahead of rumored stops at the 1.0230/40 area. HSBC bank suggested overnight that the CHF is no longer a “safe haven” currency pressured the USD higher a bit but the rate is tracking weakens to start New York. Loonie has dropped a bit and the USD has traded off recent weekly support suggesting that the recent range will hold and a rotation to the upside is coming. Forex traders expect that today’s US data will likely help the USD/CAD so a pop over the 1.0220 area again may be our sell opportunity. Look for the US trade Deficit to come in benign and a short-covering rally in the Greenback.

 

 

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

 

Resistance 3: 1.9900

Resistance 2: 1.9880

Resistance 1: 1.9840/50

Latest New York: 1.9802

Support 1: 1.9750

Support 2: 1.9700/10

Support 3: 1.9660

 

Comments

Rate spikes to new high, follows EURO higher but rate still inside range. Bids around the 1.9660 area from “large names” likely still there; short-covering rally after lower end of range failed to attract further selling. 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 early this week. Continue to expect a lot of cross-trading. Rate trapped for now, US data may help a breakout.

 

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

 

4:30am GBP PPI Input m/m

4:30am GBP PPI Output m/m

7:01pm GBP BRC Retail Sales Monitor y/y

 

 

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

 

Resistance 3: 1.5880

Resistance 2: 1.5850/60

Resistance 1: 1.5830

Latest New York: 1.5823

Support 1: 1.5750

Support 2: 1.5700/10

Support 3: 1.5660

 

Comments

Rate has a short-squeeze as stops above the 1.5800 area trigger. Model accounts on the bid traders say, selling from solid sources unable to contain the rally so far. Technical trade and sympathy with Cable remains the main driver. Close over the 1.5750 area argues for potential advance but expected sellers on approach to the 1.5800/20 area again overnight. Major support at the 1.5580 area and slightly below. Stops likely under the 1.5680 area but option defense reported at 1.5650 area. 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. Oil higher helping to lift a bit. Equities also may drive a bit today.

 

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

 

5:00am EUR Industrial Production m/m

 

 

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

 

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