Forexpros.com Daily Analysis - 22/09/2008

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Daily Forex Trading Analysis

 

Overnight Asia/Europe

 

• USD under pressure starting in Asia

• Two-way technical trade with large names on the bid for EURO

• Volumes and orders picking up a bit from last week

 

Today’s Economic Reports

All times EASTERN (-4 GMT)

• 11:30am USD FOMC Member Fisher Speaks

 

Very light day for the USA and for our trading partners; expect quiet trade.

 

Looking Ahead to Tuesday

All times EASTERN (-4 GMT)

• 10:00am USD Fed Chairman Bernanke Testifies

• 10:00am USD HPI m/m

• 10:00am USD Richmond Manufacturing Index

 

Summary

The USD is lower to start New York this morning as traders and investors await the details of the US bailout of the banking industry; confidence is lower in the Greenback today due to the underlying weakness in the financial sector that the bailout won’t necessarily address. Focus is high on where equities will trade as other financial markets around the world implement a “no short sale” rule of some kind. Oil prices are sharply higher above the $106.00/BBL level and regardless of recent bearish sentiment and optimism that the oil crisis is correcting the bull is very much alive. The Yen is again the strongest currency on the board rising against most major pairs; USD/JPY traded for a low print at 105.94 before bouncing back to the 106.40 area. Traders note sell orders active at the 107.00/10 area from Japanese lifers and exporters overnight, analysts suggest that the rally back from the 103.00 handle has completed at the 108.00 area last week and more potential downside is possible; perhaps grudgingly admitting that the USD is not in the bull mode. Cable has rallied along with EURO extending to the upside for a high print at 1.8478 putting 10 big figures in off the lows from only two weeks ago; traders note stops above the weekly high triggered. EURO high prints at 1.4627 also saw stops above the 1.4600 area; traders note semi-official demand off the Asian lows overnight. Rhetoric from the BBK and ECB officials are leaning to a firm interest rate picture near term leading to underlying support for the EURO so far to start the week. Both EURO and GBP are tracking each other closely as has been the custom the last several weeks suggesting that the move is correlated to a weaker USD and not to individual bullish sentiment from either rate; traders note that order books have thickened up over the weekend suggesting more risk-aversion and speculation will play out this week—possibly from the potential sale of Lehman to a Korean investor. In my view, the USD is becoming less attractive until the issue of the US bailout is secure in the minds of traders. Once things settle down moving forward the underlying stress on the US economy and high energy pricing will likely bring bearish pressure to the forefront. Look for technical trade to continue today and the USD to end lower.

 

 

GBP/USD Daily

 

Resistance 3: 1.8520/30

Resistance 2: 1.8500

Resistance 1: 1.8470/80

Latest New York: 1.8414

Support 1: 1.8250/60

Support 2: 1.8200/10

Support 3: 1.8180

 

Comments

Rate firms again to start the week; resistance is cleared ahead of the 1.8500 handle so expect a pullback to be bought hard. Aggressive traders can buy the next dip. Equities rally possibly to extend on US news creating whipsaw potential. Possible sovereign interest under the 1.8150 area as semi-officials seen on dips in EURO this morning; some stops triggered both ways traders say. In my view, the GBP has weathered the storm fairly well and it suggests no serious down move near-term. Cross spreaders seen active on the sell side but volumes lighter. Traders note stops mixed with offers above the market also. Major support has held for two weeks now, any weakness likely to be bought hard. Profit-taking bids continue as well. Close above the 1.8500 area for the week likely argues for another leg higher to end the month.

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

4:30am GBP BBA Mortgage Approvals

 

 

EURO/USD Daily

 

Resistance 3: 1.4690/1.4700

Resistance 2: 1.4650

Resistance 1: 1.4620

Latest New York: 1.4587

Support 1: 1.4420/30

Support 2: 1.4380

Support 3: 1.4320/30

 

Comments

Rate follows GBP higher and also makes a new weekly high; resistance is cleared so any dip is a buy opportunity. Likely support will hold at the 1.4330 area. Some upside drawn from Cable no doubt. Expect more two-way action with upside bias; traders note the rate is firm on dips so far despite the uncertainty in the market. Volumes better during the day in Asia. Traders report offers in size being absorbed. Traders suggesting that the rate is trading technically. Close over the 1.47000 area to end this week will make a lot of shorts nervous next week possibly extending a short-covering rally. Expect a solid higher close for the week. If long, look to add to positions on any weakness. Likely a dip back to the 1.4300 handle will offer a solid buy opportunity.

 

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

 

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

5:00am EUR Industrial New Orders m/m

9:00am EUR Belgium NBB Business Climate

 

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

 

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