Forexpros.com Daily Analysis - 16/07/2008

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Today’s US Dollar Trading

• USD sharply lower

• EURO scores new highs and then reverses

• USD recovers some poise into the close

 

Overnight Preview

• Look for USD recovery, move lower overdone

• Book-squaring ahead of US data in the morning

 

Looking Ahead to Wednesday

All times EASTERN (-5 GMT)

• 8:30am USD CPI m/m

• 9:00am USD TIC Net Long-Term Transactions

• 9:15am USD Capacity Utilization Rate

• 9:15am USD Industrial Production m/m

• 10:00am USD Fed Chairman Bernanke Testifies

• 10:35am USD Crude Oil Inventories

• 1:00pm USD NAHB Housing Market Index

• 2:00pm USD FOMC Meeting Minutes

 

Summary

The USD is sharply lower against most pairs but off the early lows as the markets close after a wild ride all day. The Greenback was two-way all day but later in the day recovered some poise to end flat against EURO after falling to a lifetime low ahead of the New York open. The EURO actually reversed to make lows late in the session dropping through the 1.5890 area of reported stops to trade 1.5864 low print before the slide was stopped. Forex traders note there were large names on the offers but also on the bids but once the fix was done, volumes dried up for the most part. Flows remained orderly but thinner and some are suggesting that we are at key S/R; if that is the case then expect the USD to rotate higher the next 24-48 hours. Cable rallied right with EURO and scored a high print at 2.0158 before reversing as well; traders note that the housing market in the UK may have stimulated trader reaction today due to the size of recent data suggesting the BOE must remain cautious on moving rates. Combined with Bernanke’s testimony here suggesting the Fed will not tighten until needed convinced traders that the risk was for additional volatility and longs-liquidated. GBP fell to a New York low around the 2.0010 area and in fact is remaining there into the close. USD/JPY dropped to a low print at 104.14 before staging a rally and regained the 105.00 handle briefly. USD/CHF also suffered a bout of whipsaw and posted a low print at 1.0011 before staging a strong recovery into the 1.0130 area by the close. The USD certainly has some bounce coming against people who ran with early momentum; in my view the USD will likely add to these late gains and will put on some weight tomorrow and overnight. In my view today was a head-fake in the majors. The USD break was overdone. It is more likely that the EURO will sink farther tomorrow and to end the week as a lifetime high was not enough to attract additional buying and that pair actually reversed on the day. Cable will follow EURO and the USD likely to return to resistance in the other pairs. Look for book-squaring overnight tonight.

 

 

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

 

Resistance 3: 1.5980

Resistance 2: 1.5950

Resistance 1: 1.5920/30

Latest New York: 1.5889

Support 1: 1.5850/60

Support 2: 1.5820

Support 3: 1.5780

 

Comments

Rate blasts through offers into stops for a high print at 1.6033; a new lifetime high. Reverses after London fix and Bernanke testimony (hints at no rate hike). Large names on the offer reported into the highs, look for a top to form. Aggressive traders need to sell into the rally. Selling from solid sources capped rally Monday, possibly today as well. Technical trade and sympathy with Cable remains the main driver. Major support at the 1.5580 area and slightly below. Stops reported back under the 1.6000 area from late longs. 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; which is a long way away at this point. Exponential reversal still valid. Oil volatility helping to whipsaw the rate as are weak equities.

 

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

 

2:00am EUR German Final CPI m/m

2:45am EUR French CPI m/m

5:00am EUR CPI y/y

5:00am EUR Core CPI y/y

 

 

forex[/acronym]-technical-analysis/usd-chf"]USD/CHF Daily

 

Resistance 3: 1.0180

Resistance 2: 1.0120/30

Resistance 1: 1.0080

Latest New York: 1.0113

Support 1: 1.0020

Support 2: 1.0000

Support 3: .9960/70

 

Comments

Rate follows Yen lower as expected, stops drive trade under the 1.0100 handle; “blue diamond” reversals on the Futures 60 minute chart. Trend line support broken and traders expect a test of parity soon. If short, look to ADD on a rally. If flat—be a buyer for the rally. Traders note support and trend line support failing completely and a rally will likely be sold. Stops said to be layered below the 1.0000 handle with tech support around .9950 area. Likely the rate will test under the 1.0100 area again for bids leaving a lot of potential two-way action. Buyers appear to be technical traders and expect some momentum accounts on the bid soon. The rate needs to be sold on any strength.

 

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

 

3:15am CHF Retail Sales y/y

 

 

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

 

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