Forexpros.com Daily Analysis - 03/09/2008

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Daily Forex Analysis

 

Today’s US Dollar Trading

 

• Most of the action was this morning

• USD holds gains but weakens into the end of day

• Traders note profit-taking bids in the majors

 

Overnight Preview

 

• Likely a bout of short-covering due

• Quiet ahead of US data

 

Looking Ahead

All times EASTERN (-4 GMT)

• 7:30am USD Challenger Job Cuts y/y

• 10:00am USD Factory Orders m/m

• All Day USD Total Vehicle Sales

• 2:00pm USD Beige Book

 

Summary

After a strong overnight session the USD held overnight highs across the board failing to

extend the current rally during US forex trade today; as expected ISM data came in neutral-to-weaker giving the

Greenback a bit of a pause this morning. Although trading at significant highs to start the

week the USD has failed to attract aggressive new buying traders say and in fact has given

back some gains to make lows for the New York session against Swissy; other pairs remain

mired in two-way action. Cable bounced nicely off the early NY lows for a full handle before

settling back; traders note stops were the main driver of the rate. Following Cable was EURO

naturally; also making NY highs above the 1.4540 area the rate fell back in quiet two-way

action as well. Despite the large drop in Oil the EURO was able to hold important support at

the 1.4460/70 area so far today and traders note that both GBP and EURO were seeing signs of

stabilizing; both pairs continued to see profit-taking bids on the drops all day. USD/JPY

has gone nowhere today making all its moves overnight and failing at the 109.00 handle to

close in the 108.70 area; traders note that the resignation of Fukuda overnight was largely

a non-event. For the most part today the Greenback remained inside the ranges established in

the first few hours of early NY today; despite a rally in stocks and a slight recovery in

oil the majors were simply not going anywhere after the day got started. On the block

tomorrow the major news is likely to be the Beige Book but traders do not expect anything in

there to either favor or hurt the USD. Analysts remain convinced the US economy has more

sideways consolidation or even retreat to go first before a significant amount of data is

seen to inspire confidence in a recovery. Traders look for the USD to remain under upward

pressure but admit that the USD is due for a correction. In my view, the majors are

overextended to the downside and are showing signs of a near-term bottom. With sentiment

favoring further declines yet an overextended technical picture it seems reasonable that a

relief rally is due soon. Look for the USD to trade sideways tonight ahead of US data

tomorrow.

 

 

GBP/USD Daily

 

Resistance 3: 1.8120/30

Resistance 2: 1.8080

Resistance 1: 1.8000/10

Latest New York: 1.7830

Support 1: 1.7780

Support 2: 1.7740/50

Support 3: 1.7720

 

 

Comments

Despite sharp drop during holiday trade the rate is attracting bids from larger names

traders say; price drop likely over-extended on sympathy selling from EURO. Oil no doubt

helping to drive trade but rate is becoming severely oversold. Overnight volumes lighter

traders say; cross-spreaders active in Sterling and EURO. Drop is drawing profit-taking bids

suggesting the bottom is finally trying to form near-term. Overdue for a short-covering

rally. Likely an exhaustion drop. Close back above the 1.8020 area needed to take some of

the pressure off. This stop-driven break is likely a head fake in my view. Traders expect

GBP to track EURO through this week. Continue to expect a lot of cross-trading.

 

Data due Wednesday: All times EASTERN (-4 GMT)

Tentative GBP Halifax HPI m/m

4:30am GBP Services PMI

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

 

 

EURO/USD Daily

 

Resistance 3: 1.4630

Resistance 2: 1.4600

Resistance 1: 1.4550

Latest New York: 1.4512

Support 1: 1.4460/70

Support 2: 1.4420

Support 3: 1.4400

 

Comments

Sympathy selling from GBP and lower oil drives rate into large stops under the 1.4550 area;

likely an exhaustion drop as the rate is attracting professional buying. Volumes not

impressive on the move traders say. Rate is overdue for a short-squeeze. EX reversals are

now negated near-term if a close today is under previous support at the prior low of 1.4570

area. Traders suggesting that the rate is vulnerable to a short squeeze. Market is heavily

short now so expect a rally. 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 Wednesday: All times EASTERN (-4 GMT)

4:00am EUR Final Services PMI

5:00am EUR Retail Sales m/m

5:00am EUR Revised GDP q/q

 

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

 

Also Check our Forex brokers Section.

 

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