Forexpros.com Daily Analysis - 22/10/2008

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Daily Forex Trading Analysis

 

Today’s US Dollar Trading

 

• Traders report thin conditions after the start of New York

• GBP drops to 2008 lows; EURO makes new 2008 lows

• Technicians suggest over-sold conditions brewing

 

 

Overnight Preview

 

• Look for majors to hold ranges

• Light economic Forex News

 

Looking Ahead to Wednesday

All times EASTERN (-4 GMT)

• 10:35am USD Crude Oil Inventories

Economic news continues light today for everyone

 

 

Summary

The USD continued to advance against the majors today as stops under recent lows were triggered in thin forex trade; traders note two-way trade early overnight gave way to additional risk-aversion trade as desks reported USD buy-side interest into the London fix. After the noon hour traders note that the majors continued to drift lower as sell-orders and stops continued to pressure EURO and GBP into lows. Equities were under pressure after an early rally failed and USD/JPY dropped to new lows as exporters and Japanese lifers were seen on the offer late European trade and early New York. Semi-official names and sovereigns were on the bid for EURO and GBP early traders say but support evaporated as the day went on. EURO dropped to a low print of 1.3077 before profit-taking bids lifted the rate back over the 1.3140 area; again traders report thin conditions. GBP dropped to the 1.6800 handle for a low print at 1.6835 in late New York action and the 2008 lows are now under threat; technicians are targeting the next layer of support in GBP at the 1.6750 area. USD/JPY dropped to the 100.15 area before a late rally in equities lifted the rate back to the 100.80 area. Traders note that both Swissy and Loonie extended their respective ranges higher but sellers were active on the rally and both rates dropped back into the close a bit. Most pairs have completed technical objectives analysts say and are showing signs of oversold conditions suggesting that the USD may be finally due for a correction. In my view, the USD is overdue for a correction and now that the credit crisis may be showing signs of resolution the Greenback may fall back quickly; especially if economic news is unfriendly to end the week. Tomorrow is a light day for news but later in the week Existing home sales will likely show another decline. Regardless of near-term sentiment the USD has horrible fundamentals underlying current action; I am still looking for the USD to fall back to end the year. Tomorrow will likely be a day of technical trade as the calendar is again light; look for the majors to hold existing ranges.

 

 

GBP/USD Daily

 

Resistance 3: 1.7380

Resistance 2: 1.7320

Resistance 1: 1.7250

Latest New York: 1.6707

Support 1: 1.6700/10

Support 2: 1.6650/60

Support 3: 1.6600

 

 

Comments

New low late trade today; pressured lower from stops and general technical selling. Light UK data no help overnight; traders note middle-eastern names on the bid as the rate drops. Today’s action again very two-way; stops under the lows drive trade also. Drop under psychological support at 1.7000 challenged again. Rate at buy zone now but range appears wider. Drop under the 1.7200 handle finds light stops. Monthly lows give way as sentiment won’t rally. Traders note quality bids on the dip suggesting a bottom is in here somewhere. Aggressive traders can buy under 1.7000 area but expect more whippy action. Follow-on selling likely from technical’s but spillover strength from EURO likely to be better to end the week. Look for a recovery back to the 1.8000 handle near term; two-way action likely to continue. Confirmed sovereign interest on the dip last night as semi-officials seen on dips in both EURO and GBP recently. Traders report cross-spreading for Sterling crosses likely driving the rate near-term.

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

4:30am GBP MPC Meeting Minutes

 

 

EURO/USD Daily

 

Resistance 3: 1.3500/10

Resistance 2: 1.3450

Resistance 1: 1.3380

Latest New York: 1.3060

Support 1: 1.3050

Support 2: 1.3000

Support 3: 1.2950/60

 

 

Comments

More lows late New York; stops drive trade into next technical support. Option barriers reported on the dip. Official interest noted traders say around the 1.3250 area on the break with stops driving the dip lower. OK to look to the buy side now; rotation off the lows to hold above 1.3350 suggests a near-term bottom. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. Oil two-way spills over into pricing but rate firm despite lower oil. Traders note stops building above the market along with offers. Expect more two-way action with upside bias; traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market. Traders suggesting that the rate is continuing to trade technically. Traders note official names overnight this time.

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

4:00am EUR Italian Retail Sales m/m

 

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

 

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

 

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