Forexpros Daily Analysis - Evening session - GMT

Overnight Asia/Europe
 
• USD flat to firmer in Asia, falls back in Europe
• ZEW lower, caps EURO ahead of 1.5900
• Opens New York mixed

Today’s Economic Reports

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

Looking Ahead

• 7:30 AM CDT Wednesday CPI forecast +0.3%, core +0.2%
• 7:30 AM CDT Wednesday Housing Starts and Building Permits forecast 1025K and 970K

Summary
The Greenback is mixed to open New York after a solid two-way overnight session which saw the majors continue to consolidate within established ranges. In early Asia firmer equities helped to support the USD but as trade opened in Europe economic news from UK and the Eurozone helped to turn the USD back after making slight gains. UK housing data was slightly disappointing which helped to turn Cable back for the overnight highs at 1.9793; that rate well under pressure making lows ahead of the NY open at 1.9659. Technically an inside range day for sterling and therefore inconclusive so far today, Cable is trading “heavy” according to some desks and appears ready to test for stops said to be resting just under the 1.9650 area. Should stops be triggered in that rate a sharp break to the 1.9550 area is likely; today’s US data may provide some impetus as volatility is expected around the news. EURO continues to trade firm and once again was turned back from the 1.5880 area overnight; high prints at 1.5876 again short of the highs. The rate appears ready and willing to tackle reported offers ahead of option defense at 1.5920 area; traders note stops building above the 1.5930 area. Germany’s ZEW index came out slightly lower than expected which helped pressure EURO into the lows at 1.5808 but with those lows still inside the 1.5800 handle it appears the rate has solid support for a run to the highs. Aggressive traders can look to sell EURO on a rally into fresh highs although the top could be anywhere up to the 1.61 handle some analysts suggest. USD/JPY has remained two-way inside existing S/R; high prints in Asia at 101.49 and lows at 100.78 suggesting no desire to test the waters either way so far this week. Today’s US data may offer better clues for USD/JPY as equities may tank today after inflation news is released. The rate saw no real action in Europe and is flat into the start of New York trade. In my view, traders need to be prepared for volatility around the news due out in a few moments; after things settle down (about 45 minutes) the real action should be ready to go—look for USD pressure net on the day.

EURO/USD Daily

R3:  ?
R2:  1.5915
R1:  1.5880
Current Price: 1.5829
S1:  1.5800
S2:  1.5750/60
S3:  1.5720

Rate continues to press for highs and rising wedge pattern continues to be respected suggesting an upside breakout is imminent. Aggressive traders can look to sell an upside move and remember that the top could be anywhere estimated above 1.5920 all the way to 1.6120/30 (fib projection). A scale-in strategy may be best as an average short would be mid-range on an upside move (?). Stops above 1.5920 and below 1.5780 could add to volatility and whipsaw. Hook reversal still valid but under threat. 

 
USD/JPY Daily

R3:  102.00
R2:  101.80
R1:  101.50
Current Price:  101.07
S1:  100.80
S2:  100.50
S3:  100.00/10

Rate is trapped inside range again and lacks conviction either way the past 24-48 hours. Trend line support and fib support at 100.80/90 area appears solid near-term but upside is capped ahead of 102.00 area offering good two-way action for short time frame traders. Look for volatility to increase around the US data release as the market is looking for something to break it out of current range. Stops above the 101.50 area likely to be met with offers ahead of 102.00; stops under 100.00 area larger traders say.