Overnight Asia/Europe

• USD starts Asian firmer, extends gains into early New York
• Volumes are light
• S/R holds to start

Today’s Economic Reports

• 9:00 AM Existing Home Sales forecast 4.8M

Looking Ahead

• Overnight German GDP and IFO (expect contraction to continue)
• 7:30 AM CST Tuesday PPI forecast +0.4%, core +0.2%
• 9:00 AM CST Consumer Confidence forecast 83.0

Summary
The USD was modestly higher in overnight Asian trade but volumes remained light and ranges were tight. Heading into the European open the USD looked poised to advance to start the week as traders note light stops close-in triggered from CTA-type accounts in USD/JPY began the advance. Higher prints for the rate at 108.00 before offers capped the rally; traders say that firm equities overnight and technical trade helped the advance. Rumors that SWF will be buying Yen-denominated assets also helped the rate some desks report. GBP is lower to start but is finding support as expected around the 1.9600 handle in early trade; low prints at 1.9614 overnight Europe. Traders note stops close-in at the 1.9650 area triggered the fall but the rate is recovering to the 1.9640 area in early New York; expect resistance between 1.9650/60 areas. Aggressive traders can look to SELL GBP/USD anywhere over the 1.9660 area in my view and you may get another chance this morning. EURO is softer but still holding support around the 1.4800 area; low prints at 1.4793 on light volumes. Traders note that the rate is slipping a bit in sympathy with Cable but also note cross-spreading for Yen and Sterling may be pressuring the USD slightly higher this morning. In my view, the EURO is topping again and a pullback is likely from current levels; aggressive traders can SELL EURO/USD above the 1.4825 area and you might get another chance this morning as technical trade may lift the pair to challenge the resolve of the bears back at the high prints of 1.4842. In my view, the USD is technically ready to advance after last week’s shakeout but I’m expecting S/R to offer two-way trade all week. The Greenback will likely pull-back a bit at existing S/R levels as an overall advance takes place so day-traders and short-term traders may have a lot of opportunity this forex trading week; the USD may cover a lot of the same ground more than once. Look for an orderly decline in the Europeans and overhead resistance in USD/JPY to hold. Tomorrow’s data will likely show a bit of an increase in inflation pressures to help encourage a USD advance; today’s data will likely show continued weakness in the housing sector helping the USD bears.

USD/JPY Daily

R3: 108.50
R2: 108.20/30
R1: 108.00
Current Price: 107.79
S1: 107.20/30
S2: 107.00
S3: 106.80

Rate holds inside triangle consolidation again suggesting that at least one more attempt at the highs is in the works. Aggressive traders can liquidate longs into the 108.20/30 area if you get it today as the bearish sentiment is still enough to rotate the pair lower again to probe for residual stops. I think the coiling will result in an upside breakout but the last group of over-committed late shorts needs to make their move first. Housing data likely to create some volatility so be nimble if taking an initial position.

GBP/USD Daily
R3: 1.9720
R2: 1.9700/10
R1: 1.9680
Current Price: 1.9658
S1: 1.9600/10
S2: 1.9550/60
S3: 1.9520

Rate continues to meet upside resistance at the 1.9700 area, sell-off overnight aided by close-in stops suggesting the late longs were squeezed out. Rebound to the 1.9660 area on light volume so far and technically the rate is still an inside range day. Close under the 1.9600 area likely to pressure a bout of long-liquidation. Today’s data likely will create a rush of bids but if no new high happens expect a retreat; aggressive traders can sell above the 1.9660 area with confidence in my view.

Analysis by: Jason Alan Jankovsky in Association with The Forex Edge
Publisher: ForexPros.com

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