Forexpros Daily Analysis - Morning session - GMT

Today’s US Dollar Trading
 
• USD falls but holds important S/R
• US data worse-than-expected but volumes still light
• Traders note that stops were the rule today

Overnight Preview

• Look for reasonable USD follow-through selling
• Book-squaring again ahead of more US news

Looking Ahead

• German IFO index overnight
• 7:30 AM CDT Wednesday Durable Goods forecast +1.0%
• 9:00 AM CDT Wednesday New Home Sales forecast 580K

Summary
The USD has fallen back today after a firm start overnight that gave way to stop-driven trade. Traders note that a lot of New York action was stops placed “after the bell” suggesting that some accounts were trading on the sharply worse than expected Consumer Confidence number and placing their exit orders in range. After the initial flurry of action that saw the Greenback remain within overnight ranges the USD started to slowly erode and by the end of the day had made new lows across the board making a mess of the technical potential for a rally. Picking off “hail Mary” stops above the 2.0000 handle in Cable the GBP saw a high print at 2.0028 as late shorts got squeezed after the London Fix. Traders note that volumes were light and thin conditions may have exaggerated the move but the fact is the rate is above the 1.9950 area with some authority; a fall back must happen soon or the rate will possible look to extend gains and the pullback may have been over. Aggressive traders in GBP need to be nimble and not give back gains on the short position. EURO has once again scored the 1.5600 handle as stops layered from 1.5550 were triggered all day into the close; high print at 1.5619 left resting stops above untouched for now but technically the rate looks poised for an attempt overnight. Volumes were light on the move and traders expect that the rate could try to push for a brand new lifetime high if the market thickens up a bit this week. In my view, the rate is again overextended to the upside and our liquidation stops in the short position are not hit yet so I suggest holding the trade one more day. USD/JPY gave back a lot of hard-won gains today dropping back to trade the 99.00 handle after the disappointing US data but firmed up into the close; lows at 99.62 still above key support and the rate looks to rotate higher to find close-in stops. Volumes light as well. In my view, the USD is testing the confidence of the bulls. Look for some light follow-through tonight; US data likely to help tomorrow. 

GBP/USD Daily

R3:  2.0100
R2:  2.0080
R1:  2.0050
Current Price: 2.0017
S1:  1.9980
S2:  1.9950
S3:  1.9900

Rate rallies into stops between the 1.9900 and 1.9980 area and maybe follows higher on active buying in sympathy with EURO; 100 bar MA offering resistance near term and no test of the 2.0050 area so far which is major resistance in my view. Longs likely have stops close-in so watch for a pull-back to gain momentum should the rate fall back to the 1.9950 area; traders note light volumes on this rally so it could be a classic bull trap. If not stopped out of the short—sit tight another 24 hours.

USD/JPY Daily

R3:  101.00/10
R2:  100.80
R1:  100.40/50
Current Price:  100.14
S1:  99.70/80
S2:  99.50/60
S3:  99.20

Rate technically has a net positive day with a higher high and a higher low; rate apparently testing the bull’s conviction on the day but no real selling effort threatens the recovery in my view. Look for more two-way action the next 24 hours and an upside bias may remain should stops above the 101.20 area get triggered. News tomorrow likely to help as today’s data spooked the USD bulls; a positive reading may help with a reversal higher. Dips likely to be bought around the 99.50/60 area again.