Forexpros.com Daily Analysis - 1/04/08

Today’s US Dollar Trading

• USD remains two-sided
• US data no factor
• EURO attempts new high

Overnight Preview

• Look for more consolidation
• USD likely to remain two-way near-term

Looking Ahead

• 7:00 PM CDT Monday Japan Tankan report
• 9:00 AM CDT Tuesday ISM Index forecast 48.2

Summary
The USD continued to range-trade today for the most part initially rising in Asia then falling into European trade. Briefly lower on the day the Greenback started New York close to Friday’s closing levels in technical two-way action until the release of Chicago PMI data. Although better-than-expected the report failed to lift the USD any higher than the overnight prints and in fact once the news was out of the way the USD began to falter into the London Fix. Falling hardest against the EURO the USD looked as if it might drop convincingly but bids under the market supported and the forex trading majors headed south for the most part leaving the USD trapped within existing ranges and out of the really big stops. Traders suggest that today’s action in EURO may be close to a topping signal as the market ran for new highs above the 1.5905 lifetime high but ran into offers to cap the rally at 1.5895 before falling a full handle as the day wore on. EURO actually closed negative on the day and traders argue that volatility and a lower close all point to a near-term top again. In my view the rate is indeed looking to top but there is most likely one more lifetime high in the works; the sellers today were covering longs I think. Short-term gains aside, longs are still lightening up on their positions leaving the early shorts chasing the drops. I think the close-in stops set today will fall soon as did stops at the 1.5860 and 1.5880 area did today. Early sellers are still at risk because the volumes have been light. Light volume sell-offs are not a good sign for a price decline in my view. I think aggressive traders will use the pullback to get long again as no real technical damage was done to the EURO. Cable tracked the EURO both higher and lower with lots of interest from cross-spreaders overnight. I think the GBP is set to remain whippy the next few sessions so be nimble if you are trading GBP. USD/JPY continues to hold under the big stops at 100.30/50 area and above the 98.50 area. Trapped in a range the rate is looking a lot like it did in February; look for traders to remain less-patient in that pair tomorrow. Tankan out tonight so expect some volatility.

GBP/USD Daily

R3: 1.9920
R2: 1.9880
R1: 1.9860
Current Price: 1.9828
S1: 1.9800/10
S2: 1.9780
S3: 1.9750
Rate holds below the 1.9950 area after rallying into that area today, look for the rate to bounce from the 50 bar MA again overnight with large stops likely out of reach at the 1.9780 area. Bids said to be at 1.9800/10 again with offers again on the approach to the 1.9880 area suggesting the rate will remain range-bound the next 24 hours. Aggressive traders can sell the next attempt at the 1.9880 to 1.9950 area for the next leg lower; I think the rate is due to follow-through sooner-or-later but is two-way now.

EURO/USD Daily

R3: 1.5890/1.5900
R2: 1.5860
R1: 1.5820/30
Current Price: 1.5786
S1: 1.5740/50
S2: 1.5700
S3: 1.5660
Rate tries for new lifetime high and is rejected on the first attempt; I think that is long-liquidation and early shorts capping the move but volumes were light. Stops above the 1.5900 area left untouched for now and stops above the 1.5950 area are said to be huge. Bids under the 1.5740 area layered with stops to the 1.5700 area traders say with more stops sub-1.5700. Rate looks ready to challenge for a new high the next 24-48 hours; aggressive traders can look to sell that high.


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