Forexpros Daily Analysis - 10/04/08

Daily Forex Analysis

Today’s US Dollar Trading

• USD two-sided overnight
• Breaks lower during New York but still no new range
• Equities fall driving USD /JPY lower

Overnight Preview
• Look for follow-through selling of USD
• Book squaring ahead of US data in the morning

Looking Ahead
• 7:30 AM CDT Thursday Balance of Trade forecast -57.4B

Summary
The USD ends New York softer making fresh daily lows against most pairs after starting modestly firmer overnight. Initially firmer in Asia the Greenback remained two-sided for most of European trade and actually pressed for highs against some pairs in early New York today. Traders note that volumes were modest and flows were tight but once trade was in full swing the USD came under some light pressure. Close-in stops were seen in several pairs and once the EURO/GBP cross hit stops taking the rate into highs the USD really started to correct. Although holding previous S/R from last week and only modestly lower on the day from yesterday’s lows, traders note that the USD is more psychologically weaker due to the potential for G7 rhetoric to hurt the prospects for a recovery. Also weighing on USD today is the BOW and ECB rate announcements due out overnight. Traders are looking for no rate cut from the ECB and a modest 25 BP rate cut from the BOE. In either case, the move appears “baked in the cake” and traders expect that the USD strength leading into this week may have run its course. On the day, Cable dropped to a low print at 1.9649 overnight before bouncing higher on better UK data early this morning. High prints came after the London fix as EURO/GBP rallied to new lifetime highs and GBP was hit by stops on the way higher; high prints at 1.9798 were capped by long-liquidation traders say. EURO rallied also into highs at 1.5865 before encountering selling pressure to back off the highs; overnight lows at 1.5682 now seem a long ways away for the bears. Traders look for the rate to hold firm and attempt one more try at fresh highs; offers usually resting ahead of the 1.5880 area appear to be absent on the first round today. Stops noted above the 1.5780 and 1.5800 areas. USD/JPY rallied on BOJ rate news and potential for a new BOJ governor but high prints at 102.84 overnight were never challenged in NY forex trading; falling back to find stops under the 102.10 area and more at 101.80 area the rate had a low print at 101.49 before bids helped support. Across the board the majors did not reach any fresh ground so be prepared for a rotation the other way as the consolidation continues.

EUR/USD Daily
R3: ?
R2: 1.5900/10
R1: 1.5880
Current Price: 1.5825
S1: 1.5770/80
S2: 1.5720/30
S3: 1.5680
Rate powers higher on no news and short covering traders say, look for a brief try for highs and then a correction lower. Stops above the 1.5910 area said to be thicker now than last time the rate was here suggesting that the bears are more committed. Pair is in the sell zone of resistance so be ready for a pullback if no buyers show up overnight. Stops under the market likely back at the 1.5650 area which may be out of range today. Look for a quiet overnight session with follow- through to the upside early likely.

USD/JPY Daily
R3: 102.80
R2: 102.50/60
R1: 101.90/102.00
Current Price: 101.71
S1: 101.20/30
S2: 101.00
S3: 100.80

Rate holds at resistance again drawing sellers into the mix but total range still inside previous action so no real progress made by the bears or the bulls. Traders note that volumes were modest and tracking developments in other markets left the rate vulnerable to drifting. Stops likely under the 101.20/30 area in size, another stab for those orders likely overnight as equities disappoint Asian traders. Look for the rate to continue lower by the end of the week.



Disclaimer:
Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.