Overnight Asia/Europe
• USD two-way, technical trade dominates
• Overseas data neutral
• Russians buying Cable
Today’s Economic Reports
• None in the US
Looking Ahead
• 9:00 AM CDT Wednesday Pending Home Sales forecast -0.6%
Summary
The USD is mixed to start New York after a two-way overnight session that started with the Greenback under pressure in Asia. Although Japan remained closed, the USD continued to see pressure early as speculation continues as to the near-term prospects for the US economy. With little in the way of news due from the US this week traders continue to focus on the technical picture ahead of Housing data due on Wednesday. Starting at Monday’s closing levels, the USD drifted lower on light volume until technical support encouraged a round of light short-covering; UK and Eurozone data released during European trade helped the USD to make overnight highs before settling back mid-range at the start of US trade. The big mover was USD/CAD with a low print at 1.0084 before rallying to the highs at 1.0148; traders cite higher crude prices as the driver overnight. Cable saw active cross-spreading for EURO and Yen again last night keeping the action two-way; highs at 1.9752 before UK data helped a sell-off for lows at 1.9633. Traders note that both UK data and Eurozone data pressured Cable and EURO together before Russian demand lifted Cable off its lows. EURO lows at 1.5451 is technical support and stops were seen above the previous high at 1.5520 for a high print at 1.5537; traders looking for a rally to test offers said to be resting at 1.5580 and 1.5600 areas. USD/JPY continues to orbit the 104.60/80 area; overnight highs at 105.14 with lows in early New York at 104.56 in light volume. Absence of Japan markets and weaker equities overnight putting a bit of pressure on the rate but traders say technical support at 104.20/30 area likely to hold on the first test but warn of large stops building in the 103.80 area. Aggressive traders can look to add to open shorts in the rate should we get a close below the 104.00 area today; a potential top is still forming in the 105.50 area. In my view, today is likely to remain two-way and consolidative ahead of US data tomorrow. Overseas data is largely neutral for the week so far and I think all eyes are on US data for the next few weeks; look for the USD to cover the same ground twice today.
GBP/USD Daily
Resistance 3: 1.9820
Resistance 2: 1.9780
Resistance 1: 1.9740/50
Latest New York: 1.9722
Support 1: 1.9650/60
Support 2: 1.9620/30
Support 3: 1.9600
Comments
Rate drops under the 1.9700 handle to start, look for a test of the 1.9600 area within 24 hours; likely after the news Wednesday. Close under the 1.9700 handle again needed to wash out the longs. Bounce back to trade at or near the 1.9720 area into the close suggests a rally is coming. Upside remains limited in my view but ranges can be wide as evidenced by the past few days of trade. Sell rallies if not short; buying dips dangerous.
Closes over the MA’s likely not to last so a rally over the 100 bar MA a good sell in my view. Still need down bars with higher volume to confirm; not getting that today.
Some pressure from EURO remains. Cross-spreading for Yen, Swissy and EURO evident; look for additional sell-off to end the week.
Data due Wednesday: All times EASTERN (-5 GMT)
4:30am GBP Services PMI 51.7
7:01pm GBP Consumer Confidence Index 74
USD/JPY Daily
Resistance 3: 106.00
Resistance 2: 105.50/60
Resistance 1: 105.00/10
Latest New York: 104.55
Support 1: 104.20/30
Support 2: 104.00
Support 3: 103.80
Comments
Asia closed, low volume—markets waiting for news; weak longs likely have stops under the 104.20/30 area. Close above the 105.00 handle likely to attract additional late longs; fall back on Monday with light stops suggests late longs getting out. 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 Tuesday but fall harder into mid-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. Should rate get back under the 104.00 handle expect a bounce from the 103.20/30 area if stops accelerate the move; stops could be in size at the 104.00/103.80 area.
Data due Wednesday: All times EASTERN (-5 GMT)
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