USD weakens on stops and active selling - Evening session - GMT

Overnight Asia/Europe
 
• USD weakens on stops and active selling
• Trend lines broken
• Reserve manager selling of USD seen

Today’s Economic Reports
All times EASTERN (-5 GMT)
• 8:30am USD Trade Balance -61.4B

Looking Ahead

• The week is largely Wed., Thurs., Fri; minor reports ahead of then. Big numbers are CPI, TICS, Philly Fed and Housing Data. Look for technical trade to start the week.

Summary
As expected, the USD is under corrective pressure overnight with losses accelerating at the start of New York trade. Traders cite reserve manager selling of the greenback starting in Asia; EURO is benefiting the most this morning. Currently off the overnight high at 1.5490 the EURO is firm at the 1.5460 area to start New York and traders say the rate feels firm. Light stops from spec accounts were seen around the 1.5430 area with active buying also noted; sovereign demand was cited overnight from Middle East names. Cable is starting lower under pressure from cross-spreaders. EURO-Sterling making a move toward highs again with “less dovish” remarks from ECB’ Trichets’ speech yesterday following the rate announcement being the main impetus traders say. Continued prospects for a cut in June by the BOE and no rate change for the rest of the year from the ECB are also weighing on the cross; GBP low prints at 1.9477 in early NY trade. USD/JPY fell into stops at the 103.30/40 area and quickly made a move to lows at 102.76 but traders note good demand is seen resulting in two-way action; the rate has now firmly broken trend line support and technical selling is likely to emerge on a close under the 103.20 area today. Don’t forget it’s Friday so expect some shorts to cover back as well. Swissy is on lows also with a low print at 103.98 overnight; our sell order is unable and we missed that trade. Aggressive traders can look to sell a bounce as technically the USD/CHF has broken key support for the week as well. In my view, the USD has resumed the down trend that has plagued the majors the past year. The recent show of strength since the start of the year is likely a correction within the overall downtrend. I think we can expect one more shot for the lows during the rest of Q2 and then a recovery. Look for the Greenback to settle down after the Balance of Trade data due out shortly and most of the action to be over by the London Fix.

EURO/USD Daily
 
Resistance 3:  1.5600/10
Resistance 2:  1.5550
Resistance 1:  1.5490/1.5500
Latest New York:  1.5460
Support 1:  1.5380/90
Support 2:  1.5350
Support 3:  1.5300/10

Comments
Bounce is developing nicely, rally over the 1.5400 handle significant. Rate holds opening range on the fall-back; solid sign of no sellers left. Break under 1.5300 area on stops suggests more losses are coming but a corrective bounce is needed (which is developing now) Support at 1.5280 is firm near-term. Look for rotation higher to continue into next week. Rate clears close in stops again. Strong long-liquidation break is still coming; Watch for two-way volatility. Be ready to re-short quickly when the rally ends, look for a short-covering rally to stall around the 1.5550/1.5600 area again; look to re-short in that area.

Data due Friday: All times EASTERN (-5 GMT)

NONE

USD/JPY Daily

Resistance 3:  104.20
Resistance 2:  103.80
Resistance 1:  103.40/50
Latest New York:  102.79
Support 1:  102.40/50
Support 2:  102.00
Support 3:  101.80

Comments
Drop under the 103.00 handle significant; double –top has formed and a strong sell signal suggests a potential short is now confirmed at the 105.00/50 area again. Rate has broken trend line support. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally Friday but fall harder into next week. Day traders may get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Stops could be in size at the 102.50/80 area. Resistance at 105.50/60 area remains significant now and rallies should be sold

Data due Friday: All times EASTERN (-5 GMT)

1:00am JPY Leading Index m/m 20.0%

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