Forexpros.com Daily Analysis - 25/07/2008

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Overnight Asia/Europe

• Japan CPI worse than expected

• UK GDP drops but GBP rallies in sympathy w/EURO

• Volumes lighter, SWF’s buy USD

 

Today’s Economic Reports

All times EASTERN (-5 GMT)

• 8:30am USD Core Durable Goods Orders m/m

• 8:30am USD Durable Goods Orders m/m

• 9:55am USD Revised UoM Consumer Sentiment

• 9:55am USD Revised UoM Inflation Expectations

• 10:00am USD New Home Sales

New Home Sales likely to drive trade.

 

Looking Ahead to Monday

All times EASTERN (-5 GMT)

• 12:00pm USD FOMC Member Mishkin Speaks

Very light calendar for everyone on Monday

 

Summary

The Greenback is lower this morning after failing to hold gains earned in New York yesterday; Japan CPI came in much higher than expected and USD/JPY whipsawed in early dealings. Most of the overnight action was dominated by the Yen crosses as demand for Yen pairs rallied the Yen pushing most of the major pairs higher against the USD overnight. Shorts were squeezed as close-in stops were triggered lifting the majors to previous highs against the USD making the overnight session a loss to momentum traders on the sell-side of GBP and EURO. Cable rallied back to the 1.9900 handle and found stops over the 1.9920 area also for high prints in European trade at 1.9980; two-way trade may have been exacerbated by thin volumes but the GBP caught USD bulls wrong-footed unexpectedly. Lots of sell interest reported on the approach to the 1.9900 handle including SWF’s but the offers were not enough to cap the rally at technical resistance and the next level is again in play. Expect a retreat from the highs on US data as well as technical trade the next 24-48 hours. EURO rallied back to the 1.5750 area as stops were triggered over the 1.5700 area; Forex traders report SWF supply at the 1.5715 area but as in GBP offers were not enough to contain the rally. The toolbox is currently offering a cluster of BUY signals to end the week and EURO shorts need to exercise caution at the current levels. Although the bounce to end the week is not unexpected and the larger timeframes are likely shorting EURO, the potential for the rate to whipsaw remains high. US data this morning will provide another clue for near-term direction. Should US data be friendly to the USD today expect a drop in the majors and a late rally in USD. USD/CAD rallied to a high print at 1.0171 overnight and remains the firmest of all the pairs to finish the week; aggressive traders can look to short the rate on any additional strength into the 1.0180/1.0200 areas. In my view the Lonnie remaining firm while every other major pair has suffered two-way volatility this week suggests that the USD is not out of the game yet when it comes to underlying upside potential. The large interest in Yen crosses overnight will likely fade early next week and if US data can help the USD firm up a bit before the close today I would look for this weakness to be a head-fake on the day. Look for resistance to hold for the day.

 

 

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

 

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