Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• BOE cuts rates 25 BP as expected 
• USD mixed overnight
• ECB holds rates firm

Today’s Economic Reports

• 7:30 AM CDT Balance of Trade forecast -57.4B

Looking Ahead

• 9:00 AM CDT Friday Michigan Sentiment forecast 69.4
• G7 communiqué due late Friday

Summary
The USD is under heavy pressure to start this morning in New York after holding steady in Asia ahead of interest rate announcements in Europe. As expected the BOE cut rates by 25 BP and the bank rate is now 5.0%. Cable initially was firmer heading into the rate announcement having built on Wednesday’s gains a bit tripping stops above the 1.9800 handle traders say; high prints at 1.9841 as the rate followed EURO higher. Lows for Cable in Asia at 1.9720 were brief as bids lifted the rate quickly as the rate remained two-sided ahead of the news. Traders report Russian sales of GBP at the 1.9780 area in line with upside pressure in EURO-Sterling suggesting that cross-spreaders are active in that pair today; lifetime highs in EURO/GBP at .8032 but some profit-taking is being seen. EURO rallied to new lifetime highs against the USD with a high print in European trade at 1.5915; some early pressure linked to option defense above the 1.5900 handle but the rate is firm and expected to reach further into the 1.5900 handle today. Private Swiss sales were seen at 1.5840 prior resistance but those offers were absorbed by large bids as the USD came under pressure across the board. Stops were evident in EURO above the 1.5905 area traders say and more are said to be resting at the 1.5920/30 area. Desks say the rate is “buoyant” and expect a test of the 1.60 handle before selling is to emerge; aggressive traders can sell EURO at the 1.60 handle or higher for a “first through the even” end-of-rally scenario. The EURO is the strongest currency on the board today but no meaningful correction in almost a full year plus psychological resistance suggests a drop from the 1.60 handle may be in the making. USD/JPY is under heavy pressure starting in Asia and gaining momentum through the NY open; low prints in early NY at 100.02 before bids lifted the rate briefly. Stops were finally triggered in the pair but much lower than originally suspected; large orders at the 101.00 area and more at 100.70/80 suggesting that the bulls were willing to risk significantly more than originally thought to see if the bottom is in. Aggressive traders can add to open shorts in USD/JPY looking for a test of the 12 year low.

GBP/USD Daily

R3:  1.9900
R2:  1.9880
R1:  1.9850
Current Price: 1.9795
S1:  1.9720/30
S2:  1.9680
S3:  1.9650

Rate rallies in sympathy with EURO and draws a sell signal on the drop from the high print; 50 bar MA offering solid resistance. A bit disappointing to see solid trade over the 1.9730 area but the day isn’t over yet and if this is a dead-cat bounce from the new monthly lows then a fall back through the opening range would start a reversal in my view. BOE cuts rates to help the fundamental picture and that will pressure the pair the next few sessions. Look for a break back to find stops at 1.9650 by Friday.

 
EURO/USD Daily

R3:  ?
R2:  ?
R1:  1.5915
Current Price:  1.5878
S1:  1.5840/50
S2:  1.5800
S3:  1.5760/70

Rate presses for new lifetime high at 1.5915 and more is expected; traders note that offers into the highs are being met with bids and previous highs have not suggesting the rate has a lot of potential to score the big figure round number at 1.60 handle. Aggressive traders can place a sell-limit order at 1.60 and wait for the rally. I think the correction will begin after an exhaustion rally. Stops building above the 1.5930 area some desks say. It’s going to be an interesting next 72 hours in this rate I think.