The USD is firmer this morning despite a weaker start in Asia overnight

Overnight Asia/Europe
 
• Two-way action on medium volume
• Technical action into S/R
• USD extends gains against Yen

Today’s Economic Reports

All times EASTERN (-5 GMT)
• 8:30am USD Building Permits
• 8:30am USD Housing Starts
• 8:30am USD Unemployment Claims
• 9:10am USD FOMC Member Kroszner Speaks
• 10:00am USD Philadelphia Fed Manufacturing Index
• 10:35am USD Natural Gas Storage

Looking Ahead to Friday

All times EASTERN (-5 GMT)
• NONE in the US

Summary

The USD is firmer this morning despite a weaker start in Asia overnight; traders initially sold USD after early interest stalled on reports that SWF would reduce their USD holdings for fear of weakness in the currency. The Greenback dropped to existing S/R across the board before recovering as lower oil and better equities prices helped fuel a return to higher prices for the USD. Heading into late European trade better-than-expected earnings from a handful of US financial firms helped extend the USD’s range and to start New York the USD is at the best levels of the day so far. US data due out shortly could fuel another leg higher and that most likely would encourage a round of profit-taking by the aggressive longs who bought the early dip this week. Aggressive traders can look to liquidate open longs in USD/CHF this morning with a limit order at 1.0250. USD/CHF held support on the dip in Asia at 1.0134 and is currently on the overnight high at 1.0197; high prints 1.0201 ahead of NY open. USD/JPY is also higher finding resistance from the 50 bar MA at 105.80 area; high prints at 105.71 ahead of US news. Look for a USD friendly set of data to push both Swissy and Yen into the stops layered above where new shorts could be initiated. GBP is two-way getting a lift from cross-spreaders for a high print at 2.0050 before falling back into early NY; currently 1.9990 area in light trade. Volumes across the board have been moderate with big names seen on the offer in GBP and EURO. Traders report the Russians and “smart” names selling EURO at the 1.5850 area in late European trade; EURO holding at 1.5830 area to start. In my view the USD is consolidating before a leg higher this morning. Early attempts to break the Greenback were met with quality buying suggesting that the USD will continue to rotate into the next layer of offers before an attempt at lower prices is seen. Aggressive traders can look to sell USD on this rally and remember that tomorrow there is no US data due for release. Tomorrow will most likely be a corrective day of book-squaring so it is possible that any residual USD strength today will be seen as an opportunity to liquidate and tomorrow will be “clean up”. Look for the USD to rally a bit and then stall at the next level of resistance today.

EURO/USD Daily
 
Resistance 3:  1.5980
Resistance 2:  1.5950
Resistance 1:  1.5890/1.5900
Latest New York:  1.5851
Support 1:  1.5800/10
Support 2:  1.5750
Support 3:  1.5720

Comments

Rate failing at top; low volume rally overnight was sold by professionals. Rate can’t find follow-on buying and is setting up to fall back under the 1.5900 area; stops under the 1.5800 area likely in size; expect a sharp break and a close under the 1.5800 area if US news is USD friendly. Large names on the offer reported into the highs, look for a top to form. Technical trade and sympathy with Cable remains the main driver. Major support at the 1.5580 area and slightly below. The 50 bar MA likely to offer support should the rate fall back; bids will likely be in the 1.5580 area or so on any meaningful correction; which is a long way away at this point. Exponential reversal still valid. Oil volatility helping to whipsaw the rate as are weak equities.
 
Data due Friday: All times EASTERN (-5 GMT)

2:00am EUR German PPI m/m
5:00am EUR Trade Balance

USD/JPY Daily
 
Resistance 3:  106.20
Resistance 2:  106.00
Resistance 1:  105.80
Latest New York:  105.67
Support 1:  104.80
Support 2:  104.20/30
Support 3:  104.00

Comments

Rate nearing “sell zone” around the 105.80-106.20, OK to sell in this zone if long. Exporter selling noted around the 105.50 area with more layered above traders say. If you covered shorts yesterday it’s OK to sell again today. Rate likely to have lots of selling interest on further strength to the 106.20 area; that may be it for the bounce. Exponential reversal signal still valid, expect more two-way action. Stops are likely building under the 103.80 area but on first look this week they were small; most likely they are larger now. Rally will be a dead cat bounce I think.

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

NONE