Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• USD was firm in Asia, weakened in Europe
• German IFO number better-than-expected, EURO rallies
• Traders note stops again drive trade

Today’s Economic Reports

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

Looking Ahead

• 7:30 Am CDT Thursday Q4 GDP final forecast +0.6%

Summary
The Greenback is weaker across the board this morning with the exception of Cable; traders note that a lot of stops were seen in all the majors as the USD came under pressure in Europe. Although volumes were only moderate for Asia the USD was firmer to start as Asian Equities firmed initially. Once the Nikkei began to weaken a bit the USD was unable to hold the 100.00 handle and stops under the 99.80 and 99.50 area were enough to push the USD/JPY for a low print at 99.01; the rate recovering back to the 99.25/30 area to start New York. Although the USD/JPY is again seeing pressure today the tone of the rate is more neutral rather than overtly bearish some traders have said. In my view, the USD is a long way from correcting the oversold condition and I think that an extended rally is in the works. Aggressive traders can look to buy this break if rate can manage a close over the 99.30 area after any further weakness may happen from news today. Overseas in Europe the big news was German IFO data released earlier. A higher than expected number at 104.8 tops the last two months and argues that the Eurozone’s largest economy is in continued better shape. IFO’s Nerb said in the press conference that it is “clear that German conditions do not argue for ECB cut now”; EURO rallied hard on the news tripping stops above the 1.5680 area and eventually attracting solid buying above the 1.5700 handle for a high print at 1.5748. Traders note that stops were seen all the way up in addition to a German name on the bid at 1.5700. Cable followed EURO higher initially again tripping stops as the pair rallied through resistance at the 2.0050, 2.0080 and 2.0100 areas for a high print at 2.0113 before offers capped the move. BOE’s Bean made a comment suggesting that “market pricing shows sterling’s risk to the downside” and the rate hit the skids instantly. I think it underscores the GBP’s inherent bearish structure that the rate could fall so hard instantly; making lows into the New York open at 1.9948. Cable has certainly reversed in my view; aggressive traders can look to put out shorts again if stopped out overnight on the rally. Look for today’s data to be USD friendly.  

USD/JPY Daily

R3:  100.00
R2:  99.80
R1:  99.40/50
Current Price: 99.17
S1:  99.00
S2:  98.80
S3:  98.60

Rate needs to rally out of the lows today and US data may be the catalyst as overnight action appears largely technical so far with only light flows driving trade. Light stops tripped on the break but the really big stops are likely much lower around the 98.50 area; traders report large bids in that area too suggesting that any additional weakness will be a buying opportunity and if the break is bought the market may test for a new high. Look for a long wick on today’s action by the close.

EURO/USD Daily

R3:  1.5800
R2:  1.5780
R1:  1.5750
Current Price:  1.5735
S1:  1.5700
S2:  1.5660
S3:  1.5630

Rate blasts higher and hits resistance at 1.5750 area but is holding firm suggesting the rate will look to test the 1.5800 handle soon; traders note that volumes not impressive suggesting that possibly the rate is edging into a bull trap. Missing data from yesterday so the rate has not gapped—vendor will have data fixed today. Aggressive traders can look for a sell in the 1.5730 area again as the rate likely will attract selling soon. Stops under the pair likely rolled higher also.