Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• USD on the defense overnight
• Volumes still on the lighter side
• Technical levels offering S/R

Today’s Economic Reports

• 9:00 AM CDT Consumer Confidence forecast 75.0

Looking Ahead

• 7:30 AM CDT Wednesday Durable Goods forecast +1.0%
• 9:00 AM CDT Wednesday New Home Sales forecast 580K

Summary
The USD is on the defensive this morning after starting Asia firmer; traders note that the technical levels of support and resistance appear to be containing the majors near-term. All the pairs bounced off expected support the past 72 hours and also held below expected resistance; mostly close-in stops noted as driving trade the past 24 hours. Cross-spreading for the high-yielding rates has kept a bid tone to the GBP and the EURO but traders warn that major resistance is expected to hold as sentiment for the USD appears to be mitigating a bit. No real news overnight and no surprises so far on the day but the USD continues to trade softer into the start of New York where all the pairs are on S/R. Cable found light stops above the 1.9900 handle as expected for a high print at 1.9947 where the 1.9950 area is expected to be major resistance. Offers are said to extend to the 2.0000 handle so the upside may be a bit slow-going; GBP may be under more pressure from profit taking after the release of US data as a better number for Consumer Confidence may carry more weight now that the “crisis” is over and progress is being made on the banking front. Traders have a way of changing their minds very quickly on small amounts of news and should this week suggest that “things aren’t so bad” a continued retreat by the majors is likely in my view because the USD is a long way from correcting the oversold condition. EURO is also firmer with most of the demand overnight from EURO/JPY spreaders; positive equity markets overnight helped the EURO take on a bid tone traders say. High prints at 1.5599 so far make for a fairly strong rally from the lows seen earlier but traders remind that a lot of the bids may have been early shorts covering back and bullish sentiment is not what it was last week. Offers expected to contain rallies on any attempt over the 1.5600 handle and a long wick on today’s action would likely indicate sellers attempting to take control; aggressive traders can add to open shorts over the 1.5480 area in my view. USD/JPY holds firmer although off the overnight highs at 101.05; traders note stops as expected in the 100.80 area again overnight. More upside coming in that pair I think.

USD/JPY Daily

R3:  101.00/10
R2:  100.80
R1:  100.50/60
Current Price: 100.38
S1:  100.00
S2:  99.60/70
S3:  99.50

Rate pauses on the advance as offers attempt to contain the rally; stops triggered on the move over the 100.80 area traders say with more above the 101.10/20 area and 101.50 area. Not much in the way of overhead resistance ahead of 102.50/60 area suggesting that a move into stops above the 101.20 area may ignite a short-squeeze. Bids under the 99.60/70 area said to be larger now suggesting that any extended pullback likely a buy point. Look for two-way action today into tomorrow.

GBP/USD Daily

R3:  2.0000
R2:  1.9980
R1:  1.9950
Current Price:  1.9941
S1:  1.9900
S2:  1.9880
S3:  1.9850/60

Rate attempts a recovery and finds resistance at the previous monthly high 1.9950 area; look for a pullback from here by the end of the day. It is important that the rate pullback quickly to show that shorts are in control of the market in my view; any extended time above the 1.9900 handle suggests a deeper pullback toward the 100 bar MA. Aggressive traders can add to open shorts above the 1.9900 handle expecting a fast pullback to continue the decline. Target still the 2008 lows under the 1.9400 handle.