Overnight Asia/Europe
• USD firms a bit in Asia, higher to mixed in Europe
• Russians selling EURO
• Stops drive some pairs
Today’s Economic Reports
All times EASTERN (-5 GMT)
• 08:30 Export Prices ex-ag
• 08:30 Import Prices ex-oil
• 08:30 Retail Sales forecast 0.0%
• 08:30 Retail Sales ex-auto forecast 0.5%
• 10:00 Business Inventories 0.3%
This data likely to be a non-event; markets are really watching for the larger data due on Wednesday.
Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
• 8:30am USD Core CPI m/m 0.2%
• 8:30am USD CPI m/m 0.3%
• 9:15am USD Fed Governor Kroszner Speaks
• 10:30am USD Crude Oil Inventories
Summary
The USD starts New York today mixed around yesterday’s closing levels against Yen and Swissy; firmer against Euro and Cable. Starting two-way in Asia the Greenback continued to trade quietly while drifting slightly higher; traders say firm Asian equities helped to underpin the USD. Two-way action saw the majors drop into new lows for the day as light stops were seen on the sell side of EURO and Cable. Initially rallying on the back of better-than-expected UK CPI data Sterling was able to post an overnight high at 1.9589 before sellers capped the rally and the rate fell back to make lows ahead of New York at 1.9449; traders say offers from model and momentum accounts appeared to be active into the break under the 1.9500 handle. EURO is back under the 1.5500 handle as stops were elected on the break below the 1.5480/90 area; traders say most likely those were from Model and Momentum accounts as well who were likely on the buy side yesterday. Offers from Russian names were also cited for the push lower in both EURO and Cable suggesting that the rates have solid sell interest above recent highs. Traders are looking for more near-term direction from US fundamentals due out today and tomorrow although it’s my view today’s news is likely no factor today as the majors have been trading technically for the past 24 hours. USD/JPY has rallied a bit to start New York pushing into a zone of resistance around the 104.00 handle; high prints at 104.01 are technically an inside range day from Monday suggesting that offers are thick on the approach to the recent highs. Traders say the rate appears weak near-term and losses are expected. Aggressive traders can look to sell the 103.80/104.00 area today. Swissy is also higher and at resistance with stops noted above the 1.0520 area traders say but offers ahead around the 1.0580 area are likely to cap for today. In my view, today is just another day for technical traders. I would look to fade any strength in the USD near-term and we may be on the highs for the day as we start New York. Look for two-way action regardless and for today’s data to be a wash.
EURO/USD Daily
Resistance 3: 1.5620/30
Resistance 2: 1.5600/10
Resistance 1: 1.5570/80
Latest New York: 1.5470
Support 1: 1.5450
Support 2: 1.5400
Support 3: 1.5350/60
Comments
Bounce has likely ended with yesterday’s highs; the high for the week maybe in. Rally back from dip under the 1.5450 suggests active buying on dips but the volumes remain lighter suggesting not a thick market down there. Stops likely on a break of the 1.5430/40 area today. More losses are coming. Support at 1.5280 is firm near-term. Look for rotation higher to end about now—the next 24-36 hours. Rate clears close in stops again. Strong long-liquidation break is still coming; Watch for two-way volatility. Short-covering rally stalled where expected in the 1.5550/1.5600 area again; look to re-short in that area now.
Data due Wednesday: All times EASTERN (-5 GMT)
2:40am EUR French CPI m/m 0.4%
5:00am EUR Industrial Production m/m -0.3%
USD/JPY Daily
Resistance 3: 104.80
Resistance 2: 10450/60
Resistance 1: 104.10/20
Latest New York: 103.80
Support 1: 103.20/30
Support 2: 103.00
Support 3: 102.80
Comments
Rally back from the Friday lows likely a Head-Fake; 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 and Tuesday’s attempt to score a high over the 104.00 handle may be the test of the trend line break. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; some of which likely happened overnight Tuesday. Continue to expect more volatility. Looking for the rate to briefly follow through higher for a short-covering rally through Tuesday but fall harder into mid week; likely under the 103.00 handle. 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 104.80 area remains significant now and rallies should be sold.
Data due Wednesday: All times EASTERN (-5 GMT)
7:50pm JPY Core Machinery Orders m/m -5.2%
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