Summary

The USD is on the offensive today as lower crude oil prices and higher equities prices lift investor confidence. A slew of US data today was mostly benign but higher-than-expected US CPI data increased speculation that the US Fed will soon need to return to the tightening mode; additional comments from Chairman Ben Bernanke suggested that the Fed has not ruled out intervention on behalf of the USD. Although most forex traders consider the possibility of official intervention to support the USD as unlikely it was enough to drive the major pairs into the next layer of stops said to be resting under the initial lows seen overnight. Most pairs were on the lows for the day at the New York open but once the day got under way the USD began a steady climb with only minor corrections all day. GBP fell through support at the 2.0000 handle to uncover minor stops at the 1.9980 area for a low print at 1.9955; traders note that volumes were modest but that the GBP doesn’t “feel comfortable” above the 2.0000 Handle”. EURO also found stops but more of them as the rate fell through initial support at the 1.5900 area; stops under the 1.5880 area and more at 1.5860 area for a low print at 1.5799 before a minor bounce to the 1.5820 area was seen. Traders expect the rate to continue lower all week now that the 1.5800 handle was broken; even if only slightly. Volumes were good on the move. USD/JPY rallied to the 105.00 handle but was unable to trade above; preferring to trade firm into the 104.80/90 area all day. Support on dips was from semi-official names traders say but expect more two-way action as the rate is inside previous monthly ranges so far this week. USD/CHF is also on the offensive but unable to score the 1.0200 handle; high prints at 1.0190 left upside stops rumored to be 1.0200/10 area intact for now. With the move higher in equities and the strong sense of support seen today on the dip lower many traders are suggesting that the USD is about ready to rotate higher the next few days. Should that be the case, expect the recent S/R levels seen middle-to-late last week to hold on the upside. Two-way action with wider ranges appears to be the rule to end the week.

GBP/USD Daily

Resistance 3: 2.0250/60
Resistance 2: 2.0200/10
Resistance 1: 2.0150
Latest New York: 1.9985
Support 1: 1.9950/60
Support 2: 1.9920
Support 3: 1.9900

Comments

Rate can’t hold gains overnight, follows EURO lower after no buyers came out into the highs suggesting a top is forming. Hold shorts. Offers layered above the 2.0080 area absorb stops, follows EURO lower after in sympathy. Bids likely under the 1.9950 area to support near-term but offers are getting thick from large names traders say. Traders expect GBP to track EURO through this week. Traders expect a top to form as the rate had thinner volume on the rally last week into the reported option defense so far this week. Continue to expect a lot of cross-trading. Rate at technical resistance. Stops likely under the 1.9950 may overcome bids ahead.

Data due Thursday: All times EASTERN (-5 GMT)

USD/JPY Daily

Resistance 3: 106.00
Resistance 2: 105.80
Resistance 1: 105.40/50
Latest New York: 104.97
Support 1: 104.00/10
Support 2: 103.80
Support 3: 103.50

Comments

Rate drops on aggressive selling of EURO/JPY cross; model accounts on the offer traders say. Aggressive traders can cover shorts under the 104.00 handle to take gains. Look for a rally to sell into. Rate likely to have lots of selling interest on further strength to the 105.80 area; aggressive traders can re-set shorts on a bounce. Exponential reversal signal still valid, expect more two-way action. Stops are likely building under the 103.80 area but on first look this morning they were small. Rally will be a dead cat bounce I think.

Data due Thursday: All times EASTERN (-5 GMT)

7:50pm JPY Monetary Policy Meeting Minutes
11:30pm JPY BOJ Governor Shirakawa Speaks


Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky.