Forexpros Daily Analysis - Morning session - GMT

Today’s US Dollar Trading
 
• US data positive but USD falls
• EURO rallies past resistance and is again “euphoric”
• Sentiment returning to the bearish side traders say

Overnight Preview

• Look for the USD is firm in Asia and then come under pressure in Europe
• Some book-squaring likely ahead of US data

Looking Ahead

• 7:30 AM CDT Thursday Q4 GDP forecast + 0.6%

Summary
Despite positive news from US data today the Greenback continued to remain on the defense all day building on European weakness from the start. Although the USD started in Asia on the firmer side the firm USD was short-lived as general bearish sentiment has returned to haunt the USD bulls. Trading softer all morning, traders expect the USD to continue on the defense through tomorrow’s GDP data. Today’s New Home Sales were better-than-expected and included a revision higher to last month’s numbers but the majors refused to trade lower and in fact continued to make highs all day into and after the London Fix. The one exception was USD/JPY which never revisited the morning lows but continued to build on the 99.00 handle. Low prints at 98.87 were never challenged and despite USD weakness elsewhere the rate was able to extend gains during the day for a New York high of 99.61 before settling back a bit. Obviously volatility was the rule today as the majors first rallied then fell then rallied again to end the day; most noticeable was Cable. First scoring highs overnight against the 2.0100 handle before dropping back to the 1.9900 handle then recovering to the middle 2.0000 handle to make a mess of balance sheets from both sides. No one had a winning day in Cable I am sure of it as the rate crossed a 200 plus point range three times. EURO continued to shrug off news and continued to march higher all day; highs late in New York at 1.5832 after grinding higher all day with no let-up. Traders say that the bearish USD sentiment has returned in force and the fact that the EURO has recovered so fast after the potential top was in only underscores that the rate will likely test the 1.6000 area near-term. A double-top or perhaps a new lifetime high will likely cause a lot of jawboning but Trichet’s comments today left no doubt in the minds of traders that the ECB will not lower rates anytime soon. In my view, you need to be ready for another round of USD weakness. The USD is set to challenge lows I think.

USD/JPY Daily

R3:  100.00/10
R2:  99.80
R1:  99.50/60
Current Price: 99.26
S1:  98.80
S2:  98.50
S3:  98.20

Rate continues to soften from highs the past 48 hours; traders note that stops under the market helped drive into the lows today but bids as expected at the 98.80 area. Upside is limited for now after the rate failed to build on the 101.00 trade earlier in the week. More likely the rate will consolidate with a lower bias near-term. Tomorrows’ GDP data likely factored-in to prices already so unless a surprise is in the works expect the rate to fall briefly on Wednesday.

EURO/USD Daily

R3:  ?
R2:  ?
R1:  1.5900/10
Current Price:  1.5830
S1:  1.5750/60
S2:  1.5700
S3:  1.5650/60

Rate powers higher with absolutely no offers in sight; traders expect the rate to test 1.6000 by the end of the week. In my view, the market has gone “euphoric” again and likely will ignore fundamentals as complete bullish fever takes over. Model and momentum accounts active on the bid all day traders say, look for continued volatility and a “but the dip” mentality. Aggressive traders can look for a failure at a new high on huge volume and turnover but 1.60 looks almost certain.