Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• USD firmed in Asia on G7 comments
• Faltered in European trade

Today’s Economic Reports

• 7:30 AM CDT Retail Sales forecast +0.1%, no factor

Looking Ahead

• 7:30 AM CDT Tuesday PPI forecast +0.4%, core +0.2%
• 8:00 AM CDT Tuesday TICS

Summary
The USD is softer to start New York after initially starting higher in Asia. Traders say the G7 wording invoking a change to the communiqué’s verbiage was seen as USD supportive but the Greenback was unable to add to early gains seen in Asia. Gapping higher across the board the USD began to fall in European trade eventually opening New York on the lows for the session so far; technical levels in a few pairs are again being tested and if the USD can’t hold the current lows more downside is expected before the London fix. Today’s data will likely not be a factor as the market appears focused more on the employment and growth data but a large decline might accelerate the USD’s fall. Cable initially started softer but held last week’s low at 1.9648 for a technical double-bottom. The rate began to trade higher on lighter volume and some close in stops were seen again as the rate lifted into the 1.9720/30 area; the release of UK data helped push the GBP higher during late European trade. UK output prices hit a 17 year high and combined with a firmer EURO the GBP rallied through stops higher at the 1.9800 area and currently is on the highs in New York at 1.9875; rate almost putting in a reversal. EURO remains firm after a slow start, lows in Asia at 1.5671 attracted large names traders say and the rate recovered quickly. Mid-East buying was seen in the rate around the 1.5780 area as was also seen last week in that area; high prints in NY at 1.5876 still unable to lift through the offers resting in the 1.5880 area. Traders note that the rate is building a fairly obvious rising wedge into the lifetime highs and expect at least one try for stops said to be in the 1.5920/30 area; option defense expected to be solid at 1.5920. USD/JPY is reversing hard with two-way volatility rising as well; high prints at 101.52 offered by exporters and the rate is on the lows in early NY at 100.32. Traders note that the rate is poised to find large stops that are in the 100.00 area just under the lows from last week. Should the rate break into stops it would make a rather poor showing on the charts and will likely attract additional selling on a close under the 100.00 handle. For the most part, the USD is starting the week on the defense with traders disappointed the USD couldn’t hold the early gains. Look for more downside if US data tomorrow disappoints. 

USD/JPY Daily

R3:  101.80
R2:  101.50
R1:  100.80
Current Price: 100.33
S1:  100.00/100.10
S2:  99.80
S3:  99.50

Rate fails hard at recent resistance making the 102.00 area firm overhead cap; stops under the lows from last week likely growing in size. Support under the 99.50 area likely to give at least one bounce so aggressive traders can sell the next rally. Look for stops above the market to be lowered into the 101.50 area as aggressive shorts likely to think that the high for the week is in should stops under the 100.00 area get triggered. Potential for higher prices is lower after rejection of G7 upside help.

 
EURO/USD Daily

R3:  ?
R2:  1.5915
R1:  1.5880
Current Price:  1.5873
S1:  1.5820
S2:  1.5780
S3:  1.5740/50

Rate up against offers at this moment, size said to be on the offer but bids so far able to absorb. Stops likely over the recent lifetime high but the speed of the recovery overnight suggests that those bids are the last of the stops; lots of close-in action from daily traders some desks report. If hook reversal is negated by a close over the 1.5915 area upside target is easily the 1.6080 area in my view. Look for a lot of volatility near term as traders cope with a potential breakout.