Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• Thin liquidity reported overnight
• USD continues to firm
• German PPI way over expectations

Today’s Economic Reports

• 9:00 AM CDT Philly Fed forecast -18.0

Looking Ahead

• Markets close early today for the most part
• Many closed tomorrow for Easter Holiday in USA
• Markets open Monday as usual

Summary
The USD is higher across the board to start New York today after a slow start in Asia overnight. Traders note that liquidity has been thin and prices moves have been choppy but the upward pressure on the Greenback is solid so far as shorts cover ahead of the long weekend. Not wanting to risk open-trade profits, long positions in the majors are being pared back on stop-loss selling; traders note that most of the action has been stop driven suggesting that the market is not attracting fresh buying leaving the USD free to climb into longer-term resistance. Opinions vary on whether the USD is bottoming or just correcting but for the most part traders expect to see a firm USD at least into the end of the week. Although Friday most markets will be closed it is not an official bank holiday here in the US so most FOREX platforms will be open but for the most part the trading community will likely head for the exits when futures close early today and not return in force until next Monday. Today’s Philly Fed data likely to inspire a bit of two-way action but a lot of bad news has been ignored lately due to the larger focus being on the volatility and credit “crisis” hurting the USD. I think it is a safe bet that bad Philly Fed data today will not interrupt the short-covering for very long. Overnight data was largely ignored by the majors as the USD continued to firm all night; German PPI came in higher than expected surging +0.7% m/m and +3.8% y/y. It’s another safe bet that the ECB will continue to stand pat on rates but the news had no effect on the EURO. High prints overnight Asia at 1.5652 attracted selling from a Swiss name and stops were layered under the 1.5580 area through 1.5550. Once stops were triggered the rate continued to slide for a low print at 1.5428; the rate now in full correction mode after failing at 1.5480 in my view. Objective still remains under the 1.5100 handle. GBP continued to decline despite better than expected UK retail sales data; analysts were expecting a decline of -0.2% but the rate was +1.0% better. GBP found lows at 1.9733 before a technical bounce off the 50 bar MA. USD/JPY is firmer as well trading above the 100.00 handle again but not quite into the stops at 100.40 area. USD to firm all day I think.

GBP/USD Daily

R3:  1.9900/10
R2:  1.9880
R1:  1.9860
Current Price: 1.9812
S1:  1.9780
S2:  1.9720/30
S3:  1.9680

Rate makes a technical bounce off of the 50 bar MA as expected but volumes are thin and the move likely to be exaggerated near-term. Aggressive traders can add to open GBP shorts on a bounce into the 1.9900 area where support failed earlier yesterday. Rate likely to have more downside on a failure to close firm above the 1.9800 handle today but with the weekend coming a short-squeeze is possible. Look for the rate to fail at the second test of the monthly lows; objective still 1.9400 area.

EURO/USD Daily

R3:  1.5580
R2:  1.5550
R1:  1.5480
Current Price:  1.5445
S1:  1.5420/30
S2:  1.5380
S3:  1.5350

Rate hits the protective sell-stops at eh 1.5580 area and accelerates for first downside objective at the 1.5330 area but will likely see technical bounce ahead of the weekend. Aggressive traders can add to open shorts on a bounce and likely that won’t be much higher than the 1.5500/10 area; the rate is in a liquidating break. Stops likely to be under the 1.5340 area but expect bids at the 50 % fib defense area on further weakness. Full correction to the breakout at 1.4970/80 area is target on the short side.