Forexpros.com Daily Analysis - 10/09/2008

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Today’s US Dollar Trading

 

• US data no help for the USD

• Volumes patchy at times

• Traders say no one wants to play

 

Overnight Preview

 

• Look for the USD to soften overnight

• Book-squaring may ignite a short-covering rally in the majors

 

Looking Ahead to Wednesday

All times EASTERN (-4 GMT)

• 10:35am USD Crude Oil Inventories

Light day for US data, heavier overseas.

 

Summary

The USD continues to trade two-way today attempting to extend recent gains but turned back from new highs. Traders note volumes have been patchy at times as the major’s attempt a recovery; most pairs unable to rally significantly from Monday’s action. Today’s US Housing data continued to show weakness and some desks report no activity after the news that would be considered noteworthy. With the recent advance by the greenback appearing to falter at current highs it is becoming increasingly likely that the USD will suffer at least a corrective pullback as traders stand clear of adding to long positions. GBP was unable to press for lows in New York trade today and extended the potential recovery to a high print of 1.7709 before offers capped the move. Traders say cross spreading for non-USD Sterling pairs has contributed to intraday volatility; GBP back almost a full handle lower to close around the 1.7630 area in very light trade. The lack of volume seems to suggest that buyers are scarce but short covering appears to be the rule today. EURO had a volatile day as well tracking GBP both ways after scoring a minor new low overnight; traders note stops in both pairs may have contributed to some upside today and the EURO was able to score a New York high at 1.4227 before dropping back in sympathy with GBP. USD/JPY remained under pressure all day unable to hold the 108.00 handle dropping into the 106.00 handle for a low print at 106.82 before bids supported; traders say the Yen is being heavily bought on the crosses for Sterling and EURO suggesting that the USD/JPY pair will continue to meet with upside resistance on any attempt to rally. USD/CHF also attempted highs at 1.1366 before being turned back to make lows on the day at 1.1214 but was unable to tag stops said to be resting around the 1.1200 handle and slightly below. Aggressive traders can look to add to open shorts in USD/CHF on a close below the 1.1200 handle in my view. On the day, traders note that volumes were better overnight and the poor US data was adding to the USD’s woes today; lower Oil prices likely adding a bit of support to the USD but that support will likely be short-term at this point. With the USD facing the first few days it has not been able to extend gains it is apparent that a potential long-liquidation break is developing. Look for the USD to soften again overnight on follow-on selling.

 

 

GBP/USD Daily

 

Resistance 3: 1.7800

Resistance 2: 1.7750/60

Resistance 1: 1.7700

Latest New York: 1.7591

Support 1: 1.7450/60

Support 2: 1.7410/20

Support 3: 1.7380

 

 

Comments

Rate two-way but firm on dips; traders note corporate bids on the drop to the 1.7520 area. The move was stop-driven and traders note stops above the market also. Major support numbers still are coming into view. Profit-taking bids continue as well. Hook reversal from the toolbox still valid. Price drop likely over-extended on sympathy selling from EURO. Oil no doubt helping to drive trade but rate is becoming severely oversold. 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 1.7780 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)

4:30am GBP Trade Balance

10:30am GBP CB Leading Index m/m

 

 

EURO/USD Daily

 

Resistance 3: 1.4280

Resistance 2: 1.4250

Resistance 1: 1.4220

Latest New York: 1.4111

Support 1: 1.4050/60

Support 2: 1.4000/10

Support 3: 1.3960

 

 

Comments

Rate unable to advance as yet but dips are bid; two-way trade and whipsaw result in a minor technical new low but bids are ready on dips. Traders note macro accounts selling the rate; most likely they are late. Stops suggesting bottom-picking is still being tried by early longs. Traders report offers in size being absorbed but whipsaw likely scared out both sides the past two days. Rally to high print on good volume but bottom still not secure. Likely stops rolled down to around the 1.4400 area have been cleared leaving the rate vulnerable to retracement. Likely an exhaustion drop as the rate is attracting professional buying. Rate is overdue for a short-squeeze. Traders suggesting that the rate is trading technically. Market is heavily short now so expect a rally. Rate continues to track Cable and vice-versa. Now that more stops are cleared a rotation higher is even more likely. US data this week likely to be unfriendly so be ready for more whipsaw.

 

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

2:45am EUR French Industrial Production m/m

2:45am EUR French Trade Balance

3:00am EUR ECB President Trichet Speaks

 

Analysis Provided by: Forexpros.com - Written by Jason Van Jankovsky

 

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