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The USD is trading mixed today after a generally quiet overnight session under two-way trade. Mostly on low volumes the greenback continued to trade on follow-through strength early in Asia but eventually feel into listless two-way trade into early New York. With little to focus on in the way of economic news traders are looking for solid technical trade to develop and maintain the USD in established ranges through Thursday when housing data is expected to be USD supportive. Traders will watch tomorrows’ State of the Union address by President Bush for clues to the direction of Crude Oil prices as lower energy prices are seen as USD supportive near-term. Most analysts note that the USD is overbought at current levels so without a lot in the way of news until later in the week most traders are cautious when positioning for another leg higher in the USD. In the major pairs, GBP had a solid up day pushing to 1.9790 area after the London fix this morning, traders note that cross spreading for Yen is very GBP supportive and are expecting two-way trade to remain GBP bullish with higher prices later in the week.
EURO continues to lag a bit but still firm at the 1.2950 area in lighter trade today. German PPI data was below-expectations suggesting that the ECB may not need to be aggressive on rate hikes moving forward but comments by ECB governor Weber saying that the ECB must act “ahead of 2nd round inflation risks” continued to keep the EURO bid all day. Traders are expecting an ECB rate hike in February and will likely price in a 25 BP rate hike soon. USD/JPY traded to another intraday high today, high print at 121.81 but as expected exporters and general USD selling by longs capped the move; traders note that the USD/JPY is a bit pricey at these levels and talk of a BOJ rate hike in February may set off a chain-reaction in the pair. Cross-spreaders will likely keep the upside pressure on but the pair is overbought no matter how you want to see it; a correction is coming in my view. Look for the USD to remain range-bound and two-sided the next 24 hours. Bush’s remarks tomorrow will provide some action but expect two-way trade anyway.
GBP/USD Daily
R3: 1.9850/60
R2: 1.9820
R1: 1.9790
Current Price : .19759
S1: 1.9720
S2: 1.9680
S3: 1.9620/30
Price at top of recent range and near previous resistance; OK to close open longs or at least lighten up ahead of tomorrow’s speech. Close above the 1.9800 area likely to increase risk of follow-through buying but rate getting a bit overbought in my view. Expect double top at 1.9850 area should stops above 1.9800 get triggered.
EURO/USD Daily
R3: 1.3080
R2: 1.3050
R1: 1.3020
Current Price : 1.2985
S1: 1.2950/60
S2: 1.2910/20
S3: 1.2880
Rate inside range day closing neutral after a solid “doji” star on Friday is inconclusive near-term and suggests that rate will continue in solid two-way trade near-term. Look for stops to be close-in and layered starting around the 1.3010 area to the upside and the 1.2930 area to the downside. Support seems solid on dips so expect the 1.2880 area to hold the bottom of this range.
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