Forexpros Daily Analysis - Morning session - GMT

Today’s US Dollar Trading
 
• USD two-sided and volatile
• Ends New York mixed
• ADP data fails to inspire

Overnight Preview

• Look for more two-way action, traders expect stops to be tagged
• Technical trade likely as news will be thin

Looking Ahead

• Paulson in China—expect lots of hot air
• (;)) AM CDT Thursday ISM Services forecast 49.2

Summary

After a quiet start to the overnight session the USD continued a slow climb in European trade to trigger additional stops at or near technical resistance helping the USD to add a little follow-through strength from Tuesday; traders note after the release of ADP data THE Greenback began to soften and the majors ended firmer on the day. The action would be considered two-way and the USD covered a lot of the same ground twice giving day-traders a bit of solid potential. Traders note that stops across the board in both directions were triggered suggesting that the late longs were set overnight and this morning and couldn’t take the heat after the London Fix. GBP opened New York around the 1.9820 area and dropped into the 1.9700 handle after ADP; sitting firm on support the pair began to rally and by the end of US trade had scored several daily highs for a high print at 1.9901. Traders note that firmness was partly due to stops above the overnight high at 1.9850 area and spillover strength from EURO. EURO rallied after low prints in Europe held at 1.5533 for a high print at 1.5700 even; traders report that Middle-Eastern names and official buying was seen suggesting a run for new highs may be in the works. In my view, both EURO and GBP are set for a solid move but in opposite directions relative to the USD at this point. Further strength in the GBP is a selling opportunity and further weakness in EURO is a buying opportunity. I think the EURO/GBP cross will provide some volatility that will result in a USD rally against Cable. I think the potential for bearish developments in USD for the early part of Q2 will keep the upside firm in EURO. Between the two there will be some confusing counter-trend action so if unsure how to play the USD potential near-term it’s OK to focus on another pair for right now. USD/JPY rallied overnight and into today finding support at the 101.70/80 area and pushing through stops at the 102.50 area for a high print at 102.84 before giving a lot back to close in the 102.20 area; traders note that a lot of the action was driven by stops. Look for a fall back across the board as the USD can’t hold gains.
 
GBP/USD Daily

R3:  1.9980
R2:  1.9940/50
R1:  1.9900
Current Price: 1.9878
S1:  1.9840/50
S2:  1.9800
S3:  1.9720/30

Rate rallies on short-covering, stops and technical bounce but traders expect move to fail around current levels; 1.9950 area most likely strong overhead resistance at this point as that still represents the pivot area the past two months. Stops under the 50 bar MA likely to be growing and a close back under there likely to open the door for a test of the 1.9720/30 area again. Look for the rate to fail on residual strength overnight and return to the 1.9700 handle by end of week.

USD/JPY Daily

R3:  103.20
R2:  103.00
R1:  102.70/80
Current Price: 102.37
S1:  102.00
S2:  101.70/80
S3:  101.50

Rate fails to close above the 102.50 area of technical S/R suggesting that the rally higher was slippage; close back under the 102.00 handle tomorrow argues for a “head fake” rally as large stops are said to be resting at 101.50 area from late longs. Upside likely to meet selling pressure from Japanese exporters anywhere ahead of 103.00 handle some desks say. Rate is tracking stocks so a weak Nikkei tonight might pressure the rate. Look for weakness tomorrow ahead of NFP on Friday.