Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• The USD was initially firm in Asia but rallied in Europe
• Traders report a lot of two-way action
• Stops are said to be growing at key S/R levels

Today’s Economic Reports

• 9:00 AM CDT ISM Services forecast 49.2

Looking Ahead

• 7:30 AM CDT Friday Non-Farm Payrolls forecast – 40K

Summary
The USD is generally better this morning after a solid two-way overnight session; firmer to start in Asia but rallied with good two-way flows through Europe traders say. Still inside established major S/R across the board the majors are more-or-less range trading providing a lot of opportunity for short time frame traders; in-range stops appear to be driving a lot of trade. Some desks report that option expiry interest is keeping EURO on the defensive this morning and EURO crosses appear to be under pressure this morning also. Significant technical resistance has formed at the 1.5880 area after the last few days of upward pressure have been met with good selling from large names. High prints in EURO in Asia at 1.5698 were sold by Swiss and Eastern European names traders say; stops under the 1.5620 area helped the rate under the 1.5600 handle and lows were just marked in early New York trade at 1.5509 as general selling continued. In my view the EURO has one more rally coming as sentiment hasn’t reversed but only moderated. Most desks are looking at buying dips and those traders likely will show up around the low 1.5300 handle if the sell-off gathers more steam. Cable is two-way between solid support at 1.9720/30 area, lows overnight at 1.9757; highs at 1.9898. Middle-eastern names were seen on the offer and Russian names on the bid with the rate contained in previous S/R. Poor UK PMI data was blamed for the sell-off but GBP has snapped back sharply to the middle of the range around 1.9830 in early New York. Traders note that the GBP crosses are active again particularly for Yen this morning suggesting that Cable will be supported for the day. In my view, the rate is ready to make a go for stops said to be building in the 1.9730 area and those stops are said to be in size. USD/JPY is firmer after starting Asia on the defense; lows at 102.22 were on light volume leaving stops under the 102.00 area untouched for now. Spillover strength from EURO/JPY and GBP/JPY buying kept USD/JPY buoyed and light stops over the Wednesday high at 102.80 area rallied the pair for a high print at 102.96; large option defense reported ahead of the 103.00 handle. The pair has lighter volumes and is falling back in New York suggesting no follow-through is coming. Watch for USD-negative ISM this morning. 
 

GBP/USD Daily

R3:  1.9950
R2:  1.9900/10
R1:  1.9880/90
Current Price: 1.9828
S1:  1.9780
S2:  1.9750
S3:  1.9720/30

Rate remains two-way between S/R and the probability it will stay there is dropping fast; look for a stop-driven move the next 24-48 hours as either the monthly lows for support gives way or the market heads back above the 100 bar MA. In my view, offers ahead of 1.9950 will cap any rally so aggressive traders can sell strength. Last night’s 1.9920 offer is still UNABLE this morning; OK to pull that order and sell into the 1.9850 area for short-term traders today.

EURO/USD Daily

R3:  1.5640/50
R2:  1.5600/10
R1:  1.5580
Current Price:  1.5530
S1:  1.5500/10
S2:  1.5460/70
S3:  1.5430/40

Rate fails to hold highs above the 1.5700 handle suggesting that a rotation lower to test support at the lower end of the range is in the works. Aggressive traders can look for a buy under the 1.5400 handle near-term but be careful for whipsaw if you want to sell it now; traders report lots of big names on both sides. Stops in range likely to drive trade today as the ISM number will likely cause a bit of volatility; so will NFP tomorrow. Resistance at 1.5700/10 likely to hold on rallies.