A sharp move is likely for the USD
A slew of overseas fundamentals
released both in Japan and Europe have pressured the USD in pre-report trade
ahead of US data today and the next two days. The USD is on the
defensive this morning after starting firm in Asia but
sharply-higher-than-expected Japan GDP data suggests that traders will have to
adjust to a potential BOJ rate hike ahead of forecasts. Coming in at +0.5% m/m
and +2.0% y/y vs. forecasts of +0.2 and +1.0 the USD got hit hard immediately
and fell to the overnight low at 117.39 before a UK clearer stepped in and the
pair recovered into European trade but still well off overnight highs at
118.19. Traders note that expectations for a BOJ rate hike in December are
weighing on USD/JPY and aggressive sellers were noted on the rally from the
lows. Traders note that model and macro funds were selling USD overnight.
Cable also saw a sharp overnight move but lost ground to the
USD after the release of weaker-than-expected UK CPI data. GBP has fallen to
the 1.8950 area in solid two-way trade but analysts remind that the rate is on
solid previous support at this level and with US data out this morning a sharp
break into stops is possible but given the USD weakness elsewhere a bounce
from here is expected. In my view, cable is in the buy zone and the
anticipated correction into fib support around the 1.8850 area and the rising
50 bar MA might not happen. Aggressive traders can buy GBP under the 1.8990
area but stops are said to be heavy under 1.8950. EURO is lagging the complex
this morning although solid two-way trade is developing. Weaker-than-expected
German ZEW survey pressured EURO lower initially but the rate has since
recovered and has posted a tight 45 pip range through all the excitement
elsewhere.
In my view, today’s US data and the heavy amount of data due
Thursday will determine near-term direction from these support/resistance
levels and a sharp move by the USD is likely. With the majors continuing
inside established ranges from last week I think that disappointing news for
the USD will likely break the majors to the upside while positive news will
likely cause a sharp break to the downside. I don’t think the majors will
remain range-bound after Thursday so choose your execution points carefully
and look for the opportunity to buy a solid break as I think any near-term USD
strength is an opportunity to short the USD.
GBP/USD Daily
R3: 1.9120
R2: 1.9080
R1: 1.9010/20
Current Price : 1.8975
S1: 1.8950
S2: 1.8880
S3: 1.8850
Pair drops on aggressive selling by model/momentum accounts
but has held previous support; correction to the 1.8850 area losing
probability in my view, as long as the 1.8950 area holds in solid trade expect
a rotation back to the top of the range with a potential for a breakout to the
upside. Stops said to be thick at 1.8950 area and bids said to be mixed under
there to 1.8880 area.
USD/JPY Daily
R3: 118.80
R2: 118.20/30
R1: 117.80/118.00
Current Price : 117.58
S1: 117.30
S2: 117.00
S3: 116.80
Pair holding inside range is two-way volatility, stops above
the 118.30 area said to be large enough for a test of 118.80 while stops under
the 117.20 area said to be large enough to test 116.80. Look for a violent day
as both sides of the range could be tested. Support at 117.00 area or a bit
better said to be firm, resistance at 118.80 also said to hold solid offers.
Sell rallies.
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