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

Today’s US Dollar Trading
 
• USD weakens on stops and active selling
• Trend lines broken
• Reserve manager selling of USD seen overnight

Overnight Preview

• Look for the USD to extend losses
• Likely for a bounce Monday but that won’t last

Looking Ahead to Next Week
All times EASTERN (-5 GMT)
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
The Greenback suffered losses today after a firm start overnight gave appearances the majors were remaining firm. Weaker equities were cited as likely to have an impact on traders today and the USD/JPY was unable to sustain a rally despite the USD-friendly Balance of Trade data this morning. Analysts remind that a narrowing trade gap is always positive for GDP revised upwardly their forecasts for Q1 and Q2 GDP; although the rise was minor it evidently gave the USD bulls something to hang their hats on. Rallying for the first hour or so after the report the Greenback triggered close in stops likely set from late shorts but across the board the USD was unable to make any real progress. After touching a low of 1.9456 in a knee-jerk reaction the news, the GBP rallied and after the London fix was able to regain the 1.9500 handle. High prints overnight Asia at 1.9573 remained unchallenged but technically the rate has started to form a bottom. Aggressive traders can look to go long early next week. EURO also made a technical bottom and rallied today making lows in Europe at 1.5393 and then continued building on yesterday’s strength and firmed into the 1.5470 area after some volatility in early New York this morning. Traders not that in all pairs reserve manager selling of USD was seen overnight and also into the rally this morning suggesting that the USD has made a near-term top this week and more losses will be seen next week. Aside from GBP and EURO which are trading independently in my view, the USD/JPY and Swissy are ready to resume the longer-term downtrend in place for the last year or so. Breaking trend line support and finding larger stops at previous S/R levels both pairs are weak into the close. USD/JPY fell under the 103.00 handle and despite a brief rally back to the 103.50 area the rate stayed under the 103.00 area most of the day. Lows at 102.60 look set to fail early next week. Aggressive traders can look to sell a rally if the rate bounces. Swissy under the 1.0400 handle is a confirmation that the sell signal yesterday at 1.0530/40 area was viable; if short look for the rate to accelerate mid week next week after a bounce. For the week the USD sets up for losses in my view; look for a low-volume rally to sell into before mid week.

USD/JPY Daily
Resistance 3:  104.20
Resistance 2:  103.80
Resistance 1:  103.40/50
Latest New York:  102.89
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%

USD/CHF Daily
Resistance 3:  1.0580
Resistance 2:  1.0510/20
Resistance 1:  1.0450/60
Latest New York:  1.0402
Support 1:  1.0370/80
Support 2:  1.0350
Support 3:  1.0300/10
 

Comments

Rate falls back from resistance. Rally may be expected in sympathy with weaker commodities but upside appears limited and a pullback from 106.00 area gained a lot of momentum into end of week. Bounce from 1.0250 still on the table. Be nimble though as a break below 1.0380 likely to draw aggressive selling. Rate continues to attract dip buying; next dip will likely be bought around 1.0250 area but last three dips have failed for a rally. Failure at 1.0550/1.0600 area is setting up a short; look to sell the next rally. Highs above the 1.0500 area may keep the rate two-way action before a move in either direction. Close under the 1.0400 area sets up a loss to 1.0250 near-term. Close under the 104.10 area today significant; likely to pressure lower on the open Sunday/Monday.

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

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