Daily Forex Analysis - 19/02/08

forextrader73 · #1 (**permalink**) 02-19-2008, 07:45 AM

Overnight Asia/Europe

USD weakens after two-way trade Monday
Volumes light as traders get back from the long weekend
Cross-spreaders the focus to start
Today’s Economic Reports

None in the US today
Looking Ahead

7:30 AM CST Wednesday CPI forecast +0.3%, core +0.2%
1:00 PM CST Wednesday FOMC minutes
Summary

The USD is off to a slower and lower start this morning after quiet subdued Monday trade for the Presidents Day holiday. Volumes were lighter as expected into the Asian open last night where cross-spreading for non-USD pairs was the major focus. China announcing another large CPI number helped to pressure the USD/CNY to a new record low overnight at 7.1574 with traders expecting more to come as the upside pressure on the Yuan continues to grow. The Chinese are running out of options to control their currency and in my opinion it is only a matter of time before the Yuan just takes off regardless of what Beijing wants. Demand for the Yen crosses was the rule overnight as Aussie-Yen and Kiwi-Yen all had strong upside bias taking out near-term resistance; AUS/JPY heading for the psychological 100.00 barrier but failing to trade above. USD/JPY initially opened firmer but was dragged lower on exporter sales and general bearish sentiment traders say, some light stops reported in the 107.80 area close-in but bids at technical support held firm and the lows were limited to 107.20 exactly suggesting the rate is trading very technically right now. Firmer stocks failed to rally the pair and the rate opens New York on the defensive around the 107.50 area. Cable is weaker at the 1.9500 area as interest focuses elsewhere; low prints at 1.9451 continue to remain in established ranges with only light stops on the way down forex trading traders say. Upside was helped by EURO strength but GBP only managed a high print at 1.9545 during European trade. EURO is firmer and traders note that initial pressure at the 1.4660 area eventually gave way to strong German buying lifting the rate into stops reported at 1.4680, 1.4700 and 1.4720 area; high prints at 1.4758 cleaned out a lot of order books and traders say the door is open for a test of the 1.4780 area near-term. In my view, the majors are consolidating within established ranges and will provide good two-way trade the next few days. Aggressive traders holding shorts in GBP can look to sell strength into the 1.9580 area. EURO looks poised to try for another attempt near the top of the range and if short you might want to cover back and try again higher although the best time for that would have been yesterday’s weakness. Tomorrow’s CPI might ignite volatility so be nimble.

GBP/USD Daily

R3: 1.9610

R2: 1.9580

R1: 1.9550

Current Price: 1.9510

S1: 1.9450

S2: 1.9400/10

S3: 1.9360

Rate attracting light bids under the 1.9500 handle but that might be in sympathy with EURO and not of any real substance. Volumes are light which might be increasing volatility due to thinner conditions. Upside likely limited to the 1.9610 area of fib resistance and stops are likely out of reach above the 1.9680 area for now. Aggressive traders holding shorts can add to their positions on strength looking for a test of the lows around the 1.9400 area. Look for stops under 1.9400 to be large.

EURO/USD Daily

R3: 1.4880

R2: 1.4800/10

R1: 1.4780

Current Price: 1.4745

S1: 1.4700

S2: 1.4660/70

S3: 1.4630

Rate powers higher after brief selling pressure yesterday fails to encourage the bears. Upside likely to be tough going as resistance above the 1.4800 area said to be solid. Stops likely above the 1.4800 handle but expect solid offers again to cap any rally. Downside likely to be limited also until the bulls feel the top is in place again. Look for close-in stops to be building in the 1.4630 area where the 50 bar MA is offering support. Buy signals never negated so higher prices likely before a rotation lower.

Analysis by: Jason Alan Jankovsky in Association with The Forex Edge

Publisher: ForexPros.com