Daily Analysis - 15/07/2008 : The USD continued in two-way consolidative trade

[ForexAnalysis]

[B][/B][B][U]Today’s US Dollar Trading[/U][/B]
•USD two-way within established ranges
•News is light, volumes too
•Technical trade dominated all day

[B][U]Overnight Preview[/U][/B]
•Look for quiet conditions
•Tests of S/R to cause a rotation

[B][U]Looking Ahead[/U][/B]
[B]All times EASTERN (-5 GMT)[/B]
•8:30am USD Core Retail Sales m/m
•8:30am USD PPI m/m
•8:30am USD Retail Sales m/m
•8:30am USD Core PPI m/m
•8:30am USD Empire State Manufacturing Index
•10:00am USD Fed Chairman Bernanke Testifies
•10:00am USD Business Inventories m/m
•10:00am USD IBD/TIPP Economic Optimism

[B]Summary[/B]
The USD continued in two-way consolidative trade today starting firmer in Asia but weakening a bit in New York trade this afternoon. After the London fix the Greenback came under selling pressure after the early strength seen this morning dried up as Crude Oil prices and weakness in Equities failed to inspire the USD bulls. Initially falling to lows at 1.9714 in late Europe Cable rallied to post highs on the day at 1.9965 before large offers were seen; the rate grinding higher on lighter volumes until stops were hit above the 1.9950 area. Cable found resistance at the 200 bar MA today suggesting that there is selling pressure by large players with bids on light drops. Forex traders were expecting the GBP to track EURO and once the semi-official names were on the bid in EURO the GBP rallied with it. EURO high prints at 1.5972 went unchallenged so far today but the rate is firm above the 1.5900 handle and traders are beginning to say that a test of the 1.60 handle looks almost certain after the lack of selling pressure seen recently. Traders also note that order boards are thin above the 1.5950 area with offers at the lifetime highs above the 1.6000 handle to 1.6020 area; above that the stops are thick suggesting the bias is for downside pressure as active players apparently are selling rallies while smaller or technical traders are buying dips. In my view, the upside is still limited and the potential for a large correction in EURO is still growing and a counter-trend move of significance may be brewing. USD/JPY continued to whipsaw covering a lot of the most recent ground again as technical support holds at the 106.00 area after a rally to the resistance area of 106.80 area attracted exporter selling by Japanese names. Traders note that the pair is range-trading within tighter and tighter ranges suggesting the rate is coiling for a strong breakout in one direction. Should that move be south there will be a large amount of stops layered under the 105.80 area in my view. I really think the pair is set to fall back and the move could be explosive. USD/CHF continues to chop away within established ranges; low prints at 1.0133 make for a test of the bottom of the recent trend; high prints overnight at 1.0253 were offered by large names in Asia traders say. The pair could be setting up for a broader pullback so any rally is a sell. For the most part, today’s USD trading has been about as expected with action confined to established two-way ranges. Look for tomorrow’s data to break the USD out of this area.


[B][U][COLOR=black]GBP/USD[/COLOR] Daily[/U][/B]

Resistance 3: 2.0000/10
Resistance 2: 1.9980
Resistance 1: 1.9960
Latest New York: 1.9931
Support 1: 1.9800/10
Support 2: 1.9750/60
Support 3: 1.9700/10

[B]Comments[/B]
Rate rotates higher, clears close in stops from shorts. Follows EURO higher, but large stops above the market remain. Bids likely under the 1.9800 area to support near-term but sell signal is active; traders report a lot of stops building under the 1.9790 area. Traders expect GBP to track EURO through this week. Traders now expect a top to form as the rate had thinner volume on the rally last week into the reported option defense last week. Continue to expect a lot of cross-trading.

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

4:30am GBP CPI y/y
4:30am GBP Core CPI y/y
4:30am GBP RPI y/y


[B][U][COLOR=black]EUR/USD[/COLOR] Daily[/U][/B]

Resistance 3: ?
Resistance 2: 1.6000/10
Resistance 1: 1.5980
Latest New York: 1.5906
Support 1: 1.5820/30
Support 2: 1.5780
Support 3: 1.5750

[B]Comments[/B]
Rate has a short-squeeze again as stops above the 1.5800 and 1.5880 area trigger; model accounts on the bid Friday traders say. Selling from solid sources capped rally Monday, possibly today as well. Technical trade and sympathy with Cable remains the main driver. Major support at the 1.5580 area and slightly below. Stops likely under the 1.5680 area but option defense reported at 1.5650 area. Stops noted under the previous lows layered under 1.5600 to 1.5550 traders say but those are now out of range. The 50 bar MA likely to offer support should the rate fall back; bids will likely be in the 1.5580 area or so on any meaningful correction. Exponential reversal still valid. Oil volatility helping to whipsaw the rate.

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

5:00am EUR German ZEW Economic Sentiment
5:00am EUR ZEW Economic Sentiment


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

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