Forexpros.com Daily Analysis - 21/08/2008

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Today’s US Dollar Trading

 

• USD two-way, holds ranges

• Traders report light volumes on the drop

• Late selling drops USD lower

 

Overnight Preview

 

• USD likely to have two-way action overnight

• Should get quiet ahead of US data in the morning

 

Looking Ahead to Thursday

All times EASTERN (-5 GMT)

• 8:30am USD Unemployment Claims

• 10:00am USD Philadelphia Fed Manufacturing Index

• 10:00am USD Leading Index m/m

• 10:35am USD Natural Gas Storage

Big day for news across the board; expect some potential whipsaw.

 

 

Summary

Despite a falling Oil market and a weak Gold market today, the USD was unable to extend gains again after a mid-day rally that looked like highs might score after the London fix. All the majors had rallied a bit ahead of light economic news and minor follow-on bids overnight that were turned back as the Greenback regained some poise and Equities moved higher. RHS interest in EURO at the London fix failed to provide downside pressure and heading into the end of the day the EURO is back on the offensive but still lower on the day. Forex trader’s note that the break into new lows on the day was on light volumes suggesting that the last group of late shorts has ponyed-up leaving the rate vulnerable to a rally the next 24-48 hours. Low prints were at 1.4671 and light stops reported under the lows of the day previous around the 1.4690 area suggesting that some early longs were wrong-footed. As Oil rallied back to positive territory taking EURO with it the other majors also saw a recovery from the lows seen earlier. Cable advanced back above the 1.8600 handle as shorts covered; traders note that cross-spreading for other sterling pairs helped to support the rate. Cable now has three solid buying wicks the past several sessions arguing for a near-term bottom around the 1.9560 area. USD/JPY regained the 110.00 handle for most of the day but as Equities fell off late the rate was pressured back to the lows but still holding the Asian low in the 109.60 area; traders report stops building under the 109.40 area with bids ahead suggesting some additional whipsaw is likely ahead of US data tomorrow. If the Asian session tonight finds follow-on selling a test of the 109.50 area is likely. Swissy attempted to regain the 1.1000 handle as well keeping the bears on the defense throughout the day but pressure from technical traders are keeping a lid on the rate despite lower Gold prices today. Look for the Swissy to test the lows around the 1.0920/30 area overnight as the top is well-defended above the 1.1000 area near-term. For the most part the USD is trapped in current near-term ranges and is likely to need some impetus to either rally or drop; in my view that will likely be tomorrow’s Philly Fed data but tonight is thick with news from our trading partners. Overnight action will likely include some whipsaw so I suggest not moving stops as long as they are out of range for the week. Look for a USD slide overnight and a test of lows before more two-way action.

 

 

GBP/USD Daily

 

Resistance 3: 1.8750

Resistance 2: 1.8700/10

Resistance 1: 1.8680

Latest New York: 1.8618

Support 1: 1.8520/30

Support 2: 1.8500

Support 3: 1.8480

 

 

Comments

Late rally shows solid bids coming in, rate holding above the lows and inside previous large wick. Bids expected during the day as shorts cover. Late highs driven by stops and some active buying; late shorts likely to roll stops close-in. Look for more upside this week. Rate bouncing off two-year lows and is an excellent buy in my view. Rate has likely flushed out every long now and shorts will likely take gains soon leaving the rate vulnerable to a sharp rally. Offers above the market mixed with stops from late shorts so be ready for whipsaw the next few days. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading. Get ready for the rally.

 

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

4:30am GBP Retail Sales m/m

4:30am GBP Prelim Business Investment q/q

 

 

EUR/USD Daily

 

Resistance 3: 1.4840/50

Resistance 2: 1.4800/10

Resistance 1: 1.4780

Latest New York: 1.4745

Support 1: 1.4670/80

Support 2: 1.4650

Support 3: 1.4620/30

 

 

Comments

New lows on light volume during the day, unable to extend losses. Stops on the way down at 1.4750 on Russian sales, support solid in my view at 1.4700 area; look for late shorts to bail on a move back over the 1.4780 area this week. Likely rolling stops lower to the 1.4800/20 area in size. Grind in two-way action is good but we want higher volumes on rallies to form this bottom. Some whipsaw possible but unable to make new lows so far this week. Traders report large bids on the drop but volumes died later. Traders suggesting that the rate is vulnerable to a short squeeze. Market is heavily short now so expect a rally. Larger names buying last week traders say. Likely the rate has flushed all longs. Aggressive traders can continue buying this dip for a return to resistance. Rate continues to track Cable and vice-versa. Now that stops are cleared a rotation higher is coming. US data this week likely to be unfriendly so be ready for whipsaw.

 

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

3:00am EUR French Flash Manufacturing PMI

3:00am EUR French Flash Services PMI

3:30am EUR German Flash Manufacturing PMI

3:30am EUR German Flash Services PMI

4:00am EUR Flash Manufacturing PMI

4:00am EUR Flash Services PMI

 

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

 

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

 

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