Latest Forex Analysis

Today’s US Dollar Trading

• USD started firmer, ends mixed
• US fundamentals drove trade today
• Cross traders active

Overnight Preview

• Look for more follow-through in majors to test
• Important S/R held so be ready for potential reversal

Looking Ahead

• 9:00 AM CST Thursday Philly Fed forecast -10

Summary
Solid two-way action today after US data surprises traders for the most part. Starting this morning with CPI data, an unexpected higher-than-expected +0.4% front number and +0.3% core showed that inflation pressures are still a factor for the Fed to consider. Traders chose to focus on the issue of economic slowdown rather than inflation risks and feel that the potential drop in Q1 GDP argues for further Fed easing near-term. Initially the USD rallied on the news hitting stops on the way and driving the majors into important S/R. Cable started the day weaker from cross-spreading pressures overnight and opened New York on the lows around the 1.9410 area. After the release of CPI the rate fell through light stops for a low print at 1.9360 before bids showed up. Short covering/profit taking helped lift the rate off the lows and the rate continued to build on gains all morning until the release of FOMC data showing a very high agreement to continue with the easing process. Cable rallied into the 1.9400 handle again and back for a high print during New York trade at 1.9445; the area of previous support. EURO had a similar ride today falling all the way under the 1.4630 area for a post-CPI low of 1.4613 before recovering. As the day wore on the rate reversed hard and rallied a full handle to post a high after FOMC at 1.4724 no doubt burning a few order books in the process. USD/JPY had a more conservative day but still remained within established ranges for the entire day. High prints at 108.37 and Asian lows at 107.42 were still within the coiling triangle that has plagued recent trade. Aggressive bids tried to make a run for stops above the 108.30 area but with no one home; the rate fell back but still maintained a firm tone all day eventually closing above the 108.00 handle. Despite that firm close in USD/JPY today many traders are expecting a defensive USD in the days ahead. No follow-through buying and a solid recovery by other major’s pairs suggest that today’s USD strength will be short-lived. Today’s action can only be described as “whipsaw” for most traders and I think a fall back in the Greenback is very likely in the days ahead. Tomorrow is Philly Fed and a negative number will not help the USD’s fortunes near-term. Without a solid round of overnight buying I don’t see the USD holding firm through Friday.

USD/JPY Daily
R3: 108.80
R2: 108.50
R1: 108.30
Current Price: 108.17
S1: 107.80
S2: 107.50/60
S3: 107.20/30

Rate continues to hold within coiling triangle as bids continue to be insufficient to trigger large stops said to be resting above the 108.30/50 area somewhere. Today’s high prints found willing offers and more are said to be layered to 108.50 area suggesting that the top may be labored for now. Bids back at 107.20/40 area likely to support again so expect two-way action to finish the week should a retreat develop overnight tonight. Tomorrow’s data may be enough to inspire a round of long-liquidation.



GBP/USD Daily

R3: 1.9500/10
R2: 1.9480
R1: 1.9450
Current Price: 1.9414
S1: 1.9380
S2: 1.9350/60
S3: ?

Rate breaks into triple-bottom support and recovers nicely to close above previous support, effectively negating the push lower. Stops triggered on the way down were taken out and no aggressive new selling was seen resulting in whipsaw for the shorts. Stops above the market likely moved close-in; look for an inside range day closing higher tomorrow to wash-out weak shorts set today. Offers above the market likely back at 1.9500 layered to 1.9550 area leaving lots of room for volatility.

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