Forex Daily Analysis - 19/08/2008

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[B]Today’s US Dollar Trading[/B]

• Greenback unable to extend gains
• Volumes light
• Big news out tomorrow may have sidelined traders

[B]Overnight Preview[/B]

• Look for two-way action, consolidation
• Possible follow-on selling in Asia to start

[B]Looking Ahead[/B]
[B]All times EASTERN (-5 GMT)[/B]
• 8:30am USD Building Permits
• 8:30am USD PPI m/m
• 8:30am USD Core PPI m/m
• 8:30am USD Housing Starts
• 10:00am USD FOMC Member Fisher Speaks

[B]Summary[/B]
Heading into the close for Monday the USD is slightly mixed as pressure from equities rubs a little shine off the bull’s horns; most of the major pairs are slightly lower to about unchanged on the day. Although sentiment remains firm for the Greenback there are signs that the current rally is about to falter; the biggest indicator is low volume in my view. Most pairs had a flurry of activity early ahead of the London fix but have since slowed down measurably from early order flows. Cable is holding firm around the 1.8650 area after making a run for lows but was unable to test the overnight Asia lows still in place at 1.8624; a late rally was turned back from the 1.8680 area and the rate remains steady in the middle of the range. [/COLOR] [URL="http://www.forexpros.com/"][COLOR=black][/COLOR][/URL][COLOR=black]Traders report the GBP is still tracking EURO higher and lower but the EURO remaining firm at the 1.4700 area after a brief spike to fresh New York highs at the 1.4730 area suggest the rate is possibly building for a short-squeeze. EURO has a load of news due tomorrow which is expected to be neutral-to-bearish for the rate so depending on how much downside the rate can manage overnight on the news will likely determine if a run for stops under the 1.4620 area is in store; if holding longs from this morning around the 1.4700 handle is fine for now. Tomorrow’s US data is likely to cause a bit of volatility as well so if the EURO can hold current lows after the news there is a good probability the rate will make a run for high stops likely in the 1.4750 area or higher by mid-week. USD/JPY was under pressure off the highs all day and made new lows for the day at 109.96 but saw a bit of bids show up to hold the 110.00 handle; traders note volumes were thin on the move making for potential volatility near-term. Look for the rate to find stops under the 109.20 area to be in size and a liquidating break to develop if the rate can’t score a new weekly high above the 110.60/70 area; OK to hold shorts for now as well. Loonie came off the lows for the day to trade higher as dropping oil prices continued to attract bids but the rate is showing signs of weakness in my view; OK to hold shorts with stops currently working. In my view, the USD is looking a little “toppy” today and if large bids don’t show up overnight or during the news the Greenback is looking vulnerable for a correction. Look for a quiet overnight session and possibly some follow-on selling to start Asia; the “buy the dip” crowd will likely support the USD overnight so expect some two-way action near-term.


[B]GBP/USD Daily[/B]

Resistance 3: 1.8780
Resistance 2: 1.8750/60
Resistance 1: 1.8720/30
Latest New York: 1.8640
Support 1: 1.8620/30
Support 2: 1.8600
Support 3: 1.8580

[B]Comments[/B]
Rate struggling to hold gains but is off the weekly low from last week; today’s open shows net bid follow-through but some weakness. Look for more upside this week. Possibly shorts covering ahead of the news due Tuesday. Rate bouncing off two-year lows and is an excellent buy in my view. Rate has likely flushed out every long now and shorts will likely take gains soon leaving the rate vulnerable to a sharp rally. Possible buying from semi-official names so watch the news. Offers above the market mixed with stops from late shorts so be ready for whipsaw the next few days. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading. Get ready for the rally.

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


[B]EUR/USD Daily[/B]

Resistance 3: 1.4850
Resistance 2: 1.4820/30
Resistance 1: 1.4770/80
Latest New York: 1.4695
Support 1: 1.4670
Support 2: 1.4650/60
Support 3: 1.4620/30

[B]Comments[/B]

Stops-driven sell-off scores new low last week but rate bounces smartly suggesting at least a small interest in bottoming. Failure to hold above the 1.4700 handle likely to draw in late shorts. Traders report large bids on the drop but volumes died later, lower oil pricing pressures prices all day. Traders report model/macro accounts continue selling the rate. Traders suggesting that the rate is vulnerable to a short squeeze. Market is heavily short now so expect a rally. Larger names buying last week traders say. Likely the rate has flushed all longs. Aggressive traders can buy this dip for a return to resistance. Rate continues to track Cable and vice-versa. Now that stops are cleared a rotation higher is coming. US data this week likely to be unfriendly so be ready for whipsaw.

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

2:00am EUR German PPI m/m
5:00am EUR German ZEW Economic Sentiment
5:00am EUR ZEW Economic Sentiment


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

[B]Forex Analysis Provided by[/B]: Forexpros.com written by Jason Alan Jankovsky.

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