Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• USD followed through higher in Asia briefly
• Gave back some gains as volatility continues
• USD trading through resistance before falling back

Today’s Economic Reports

• None in the US

Looking Ahead

• 9:00 AM CDT Thursday Philly Fed forecast -18.0

Summary
The USD opens New York mixed after giving back some gains in overnight action; traders note that volumes are light and liquidity is thin. Initially firmer to start Asia the USD rallied through near-term resistance but saw some profit-taking by the shorts give way to aggressive selling by large names. Perhaps still on the “sell rallies” thinking, traders note that a large US investment house was on the offer for USD/JPY as the rate climbed to the high prints at 100.46. The rate began to slide back and aggressive selling came in from new sellers and close-in stops from early longs; speculation that the banking sector still has issues found the Yen back in favor pushing the rate to the overnight lows at 97.66. Obviously volatility is still working both ways in the USD today. Cable initially firmed as traders bought the technical bounce off the weekly lows yesterday at the 1.9950 area rallying the rate to the highs at 2.0153 before the BOE minutes were released; MPC showed a split with 2 dissenters calling for a 25 BP cut. GBP broke back into the lows and made fresh lows to open New York at 1.9949; traders expect that a close in this area under the 100 bar MA signals further declines. EURO initially weakened further in Asia for a low print at 1.5612 before short-covering began to lift the rate higher. Traders complained of thin conditions so the rally to the highs at 1.5786 may have been exaggerated; the rate is trading the 1.5710/20 area to start New York. EURO remains on the offensive as rhetoric overnight continues to question how the US economy will respond to the aggressive rate cuts by the US Fed the past few months and how soon the ECB will make a move on rates. In my view, the EURO has technically topped and at least a small correction is overdue making a long EURO position risky today. Aggressive traders can sell EURO over the 1.5730 area for a pull in my view. Across the board the USD is trading two-way but showing signs of upside potential; shorts are covering and liquidity is thin for further declines. Look the Greenback to continue firming in two-way action ahead of Philly Fed due out tomorrow—not Friday as I reported yesterday; you would think someone who has been doing this as long as I have would get his days straight. Anyway—look for the USD to firm further today.

GBP/USD Daily

R3:  2.0150/60
R2:  2.0080
R1:  2.0020/30
Current Price: 1.9982
S1:  1.9940/50
S2:  1.9900
S3:  1.9850/60

Rate continues to soften after briefly testing the resolve of the longs to hold positions on the bounce from weekly support at the 1.9940/50 area; note that the support is a triple bottom testing the breakout higher from the same area last week. Aggressive traders can add to open shorts on a break down under the 1.9940 area as large stops by the longs are likely to be triggered. Close today under the 100 bar MA argues for further weakness this week.

EURO/USD Daily

R3:  1.5810/20
R2:  1.5780
R1:  1.5720/30
Current Price:  1.5695
S1:  1.5650/60
S2:  1.5610/20
S3:  1.5550

Rate continues to see signs of weakening as another attempted rally to hold the 1.5800 handle fades this morning. High prints at the 1.5780 area overnight were quickly sold and traders report semi-official names on the offer in that area recently suggesting that the top may be in at least near-term. Stops under the 1.5600/10 area likely to be getting thick as initial stops under the 1.5660/70 area were not large enough to trigger a solid long-liquidation break. Look for downside pressure all day today.