Forexpros Daily Analysis - Evening session - GMT

Today’s US Dollar Trading
 
• USD two-sided in thin volume
• Gives back a large portion of recent gains
• Ends mixed

Overnight Preview

• G7 communiqué out tonight, expect volatility on Sunday

Looking Ahead

• Big Week ahead for the USD
• Philly Fed, TICS, CPI, PPI, Retail Sales and Housing data all due

Summary
The USD ended Friday with a whimper after making a roar on Thursday, traders note that volumes dropped to nothing after the London fix as desks wind down from the volatility seen the past 36 hours or so. All eyes turn to the G7 communiqué due out around 6:30 PM EDT today and most market watchers are expecting a neutral to mildly USD-supportive. Debate on the health of the financial sector and the world economy is expected to address fixes for the “credit crunch” as well as help for the ailing USD. Although no one expects any concrete plans or certain intervention, most traders agree that the tone of the meeting will lend more to avoiding further crisis. On the day, the USD ended mixed waiting on the news. Earlier today Michigan Sentiment came out much lower than expected and the USD had a mildly muted response having put in lows on the day earlier. Cable continued to hover around the 1.9720/30 area first higher overnight and then lower during US trade; low prints made around the London Fix at 1.9682 and then the rate stayed within a 30 pip range for the rest of the day closing near the 1.9720 area. EURO was firm and actually drew stop-driven trade after recovering smartly from the two big-figure sell-off yesterday; traders note that offers ahead of the 1.5860 area and more at the 1.5880 area were more than enough to hold the rate to a high print at 1.5857. Counting yesterday’s sell-off and today’s rally the EURO has held to within a handful of points from another all-time high with sellers apparently nervous as they were the stops today; I don’t see EURO dropping before another test of what’s over the 1.5930 area. USD/JPY fell back through hard-won gains today; initial high prints in Asia at 102.26 were never challenged and in fact the rate plummeted to lows at 100.63 shortly into US action this morning. Closing weak and under the 101.00 handle the rate tried for lows again into the close effectively ending any bullish enthusiasm out there from Thursday’s action. In my view, the USD is set-up for a re-test of the recent 2008 lows and there is where you can expect a bit of a bounce. Early longs again got spanked so next week will likely see them pause. Look for a lower open on Monday.
 
USD/JPY Daily

R3:  101.80
R2:  101.40/50
R1:  101.00
Current Price: 100.70
S1:  100.50/60
S2:  100.20
S3:  100.00

Rate gives back all the gain from yesterday and traders note that stops early overnight helped a bit suggesting that longs were working on a small timeframe. Support at 100.50 area said to hold only minor bids and psychological support at 100.00 is likely more important for the near-term drop. Look for the rate to extend losses early next week but a bounce from the 100.00 area is likely too. Aggressive traders can sell strength and anything over the 101.80 area likely to be a great short.

GBP/USD Daily

R3:  1.9850
R2:  1.9820
R1:  1.9780
Current Price:  1.9723
S1:  1.9700
S2:  1.9650
S3:  1.9600

Rate end with a “doji” star formation suggesting that the rate has an equal share of bulls and bears squaring off as the pair hovers around the former monthly lows at 1.9720 area. The rally fizzled quickly and in less time than the break took to build suggesting the bears are in control and happy with their positions. Aggressive traders can look to add to open shorts early next week; in my view the 1.9600 area needed to be tested this week so a bounce may give a nice sell looking for a new low on the month.