Afternoon US Dollar Wrap-Up
The USD continued mixed today trading higher against the GBP and EURO but
flat to lower against JPY. Overnight action was dominated by technical factors
as the greenback remained inside established ranges into late European trade.
The Majors saw additional weakness in New York as the USD enjoyed a brief
boost higher on Existing Home Sales coming in at a higher-than-expected 6.69M
units. The USD ran into light stops in the 1.9600 area in cable and the 1.3310
area in EURO, close in stops above the 118.00 handle in USD/JPY were cleared
overnight but late strength in the rate found another round of day-stops back
above the 118.00 area for a firm close in the USD/JPY.
Exporters were noted sellers in USD/JPY but the expected year-end fiscal
Yen repatriation has been absorbed and Yen strength appears to be waning as
traders re-focus on the carry. GBP has fallen back through important
psychological levels today and traders note that near-term sentiment has
turned neutral. Although underlying bullish fundamentals are in play and
buying dips appears to be the strategy of choice lately, most traders agree
that the GBP may be a bit overdone to the upside and due for a correction.
Aggressive traders may have early shorts in Cable but caution is recommended.
EURO fell back to challenge support at the 1.3280 area; low print late in the
day at 1.3284 leaving large stops under the 1.3280 area intact. Traders note
that the EURO has given back 100% of the post-FOMC gains seen earlier this
week and has put in a “failed high†price pattern suggesting that a correction
lower is in the works.
Aggressive traders with active shorts can ADD to their positions looking
for a reasonable break to initial Fib defense around the 1.3180 area; eventual
target of the low 1.3100 area for a short position. In my view, the USD is
setting up for a rally against the majors next week but I would expect the
rally to be muted against JPY. This correction is an opportunity to set USD
shorts again and any major break in the Majors should be seen as a buying
opportunity. Look for the majors to follow-through to the downside early next
week; economic calendar may contribute. Big news is mid-week with GDP; traders
expect to see a modest drop in the front number. Have a great weekend.
GBP/USD Daily Futures
R3: 1.9750
R2: 1.9700
R1: 1.9650
Current Price : 1.9607
S1: 1.9550
S2: 1.9500/10
S3: 1.9480
Rate giving back some room today and more likely next week as late longs
are squeezed out ahead of potential news for the USD. Expect medium support
form the 50 bar MA but stops under the 1.9550 area may be quite large
accelerating a potential break. Close back over the 1.9700 area needed to keep
near-term bulls happy, close under the 1.9550 area likely to argue for deeper
correction.
USD/JPY Daily Futures
R3: 8650
R2: 8610
R1: 8580
Current Price : 8562
S1: 8520
S2: 8480
S3: 8420
“Doji†close on the day argues for a point of indecision and also at a
weekly low suggesting a rotation higher is again likely. Carry resets and
general Yen malaise today likely to have kept the rate under pressure despite
a late rally. Pull back below the fib support at 8550 area likely to be bought
with both hands so be ready; sentiment is changing I think and savvy traders
likely to be buying dips.
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