Afternoon US dollar wrap-up
The USD had a rather uneventful day
for the most part as flight-to-quality buying dried up in Asia overnight in
response to a stable Thailand situation and today’s FOMC rate
announcement was as expected. Overnight the USD came under pressure as traders
unwound non-USD crosses giving the Yen a bit of a boost into New York trade
this morning but as the day wore on the majors continued to drift slightly
firmer on light volume as the time for the Fed announcement drew near. The
FOMC chose to keep rates on hold at 5.25% as was widely expected but the
statement was slightly changed to reflect the need for continued vigilance but
for the most part the entire event was over in about 30 minutes and the USD
saw little movement in either direction.
Traders note that volumes after the Fed statement were a bit
better but for the entire day the market was basically stale. GBP/USD saw the
best action in my view rising into close-in stops above the 1.8880 area in
early US trade and remaining firm into the FOMC; post-announcement saw the
rate rally through additional stops above the market for a high print at
1.8932 before settling back to the 1.8880 area. EURO rallied in sympathy to
the 1.2730 area before seeing supply and resistance seems solid above
1.2730/50 area; traders say stops could be quite large above the 1.2750 area
but for now the rate has good supply on the approach. Support is also solid in
EURO at the 1.2650 area so the rate seems destined to remain in that tight
range near-term until more news can break the pair out of this consolidation.
USD/JPY remained range bound as well, high prints over night at 117.78 capped
to the upside while 116.97 held the sellers at bay to the downside.
Given the nature of the day’s news and the recent unexpected
fundamentals from Asia, the USD is setting up for a solid break in my view by
the end of the week. Of more import I think is US Treasury Secretary Paulson’s
visit to Beijing tonight; look for Yuan supportive rhetoric to underpin Yen.
For the rest of the week I think the USD has fairly priced in the current
interest rate picture between our trading partners and attention now focuses
on Philly Fed tomorrow and expectations for an ECB rate hike in two weeks.
Look for the USD to slide off overnight and break again after US data in the
morning.
GBP/USD Daily
R3: 1.9050
R2: 1.9000
R1: 1.8950/60
Current Price : 1.8902
S1: 1.8880
S2: 1.8820
S3: 1.8760
Pair building nicely on developing up trend; momentum is
building too for a try to the upside highs near-term. More likely to see a
close over 1.9000 near-term than a break lower. Volumes OK but real buy-stops
farther out at 1.9050 I think. Look for two-way trade with a higher open in
New York for Thursday and another higher close Thursday afternoon. Stops below
1.8820 traders say and may be out of range.
USD/JPY Daily
R3: 8780
R2: 8710
R1: 8650/60
Current Price : 8621
S1: 8600
S2: 8550
S3: 8500
Pair set to launch higher in my view, sellers appear
exhausted and unwilling to add to open shorts. A massive short-covering rally
is due any time now so expect stops to trigger close in around the 8760 area
or slightly beyond. From here to there expect solid two-way trade with a
higher bias. Traders say record long open shorts likely to have seen some
early liquidation since last Monday.
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