Forexpros Daily Analysis - Morning session - GMT

Today’s US Dollar Trading
 
• USD range bound ahead of PPI
• Muted reaction to the news but USD extends gains
• Traders note stops flushed

Overnight Preview

• More consolidation within existing ranges likely

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
After a quiet two-way start overnight in Asia the USD stayed within existing ranges until the release of US PPI this morning. Traders note that the data was seen as USD supportive but not enough to break the USD out of current ranges; PPI out at +1.1% (well above expectations) while core was out at +0.2% (as expected). The Greenback attempted to build on initial gains but remained two-sided until after the London fix where a bit of additional buying lifted the USD into fresh highs against most pairs later in the day. Cable of course the big mover as UK data overnight was not so supportive and stops were finally triggered on the dip below the 1.9650 area. Low prints during late New York at 1.9603 erased a potential option barrier traders say and leave the door open for a test of the 1.9550 area near-term. Aggressive traders can look to add to open shorts on a rally back to test the 1.9680-1.9720 support zone. EURO also fell off a bit but remained above important support making a very strong case for the rising wedge formation to remain viable into the next round of data. High prints again at 1.5876 turned back from offers at the 1.5880 area and slightly higher traders say and after the news stops under the 1.5800 handle were triggered; lows later in the day at 1.5750 as more stops were set off. EURO is now poised to tackle a zone of bid interest said to extend from 1.5750 to 1.5720 with more stops below but most desks note that buying the dips is still on most traders minds as the downside still is seen limited until a test of the 1.6000 handle possibly changes the sentiment near-term. Expect a modest recovery from additional lows if they are seen overnight. USD/JPY continued to find bids on the dips as low prints overnight Asia at 100.78 were never challenged during NY trade; highs at 101.81 came later in the day with offers said to be thick above this area extended to 102.00 with stops beyond. For the near future the USD is tightly constrained by these existing S/R levels; stops have been in range and the volumes have been light suggesting the smaller trader is active. Firmer equities overnight likely to support the USD/JPY but for the most part the USD is range-bound. Look for book squaring ahead of CPI tonight.
 
GBP/USD Daily

R3:  1.9700
R2:  1.9680
R1:  1.9650
Current Price: 1.9607
S1:  1.9600
S2:  1.9580
S3:  1.9550

Rate drops back to potential support and tests the lows late in the day suggesting there is more downside coming after a slight bounce. Look for the upside to remain limited to between the 1.9680 and 1.9720 zone with follow-through selling expected tonight. Stops likely clustered under 1.9550 and layered with bids to 1.9520 area suggesting volatility is in the works too. In my view, the potential for a rally back above the previous monthly low is dropping quickly on closes at or below 1.9600.

USD/JPY Daily

R3:  102.20
R2:  102.00
R1:  101.80
Current Price:  101.54
S1:  101.00/10
S2:  100.70/80
S3:  100.50

Rate has inside range day closing higher which is technically inconclusive at this point. Traders note volumes were light and the rate seemed to be tracking equities more than other things. Additional impetus seen on tomorrow’s CPI should the data disappoint and a break back to trend line support around the 100.50 area is likely. Look for stops building in range now that the up-channel continues to be respected. A break lower very possible tomorrow with a quick drop under the 100.00 handle