Afternoon US Dollar Wrap-Up
The USD bulls had a day to smile over today as the Greenback climbed in lighter post-FOMC trade. Overnight saw the USD mixed-to-firm in Asia ahead of data from the UK; UK retail sales data and CBI data came out above expectations and the GBP rallied to score a high print at the 1.9730 area before aggressive offers capped the move.
Cable continued firm into the start of New York trade but after the London fix the majors began to feel “tired†and the USD legged higher into light stops led by the USD/JPY pair. High print at 118.30 was enough to cap the move as bids attempted to overcome offers above the 118.00 area when the stops at 118.00/10 were triggered. The move was fast and quick suggesting that the bids were cleaned out fairly quickly; USD/JPY falling back almost immediately into the IMM close. Traders note that the volumes were not that strong across the board making for interesting trade; the USD appears to be mixed interest with sellers against Yen and buyers against GBP.
Analysts note that the bear pennant in USD/JPY has not been violated and after a try for stops above the market, it appears ready to rotate lower into support which is rising making the 117.00 area more important at this point. Traders look for volatility to increase in the USD/JPY near-term and aggressive traders could certainly sell rallies (buy dips in futures).
EURO has dropped back aggressively as well after the London fix making lows around the 1.3310 area before technical support was found. Traders’ note that the rate has stops building in the 1.3280 area but bids layered ahead of there suggesting that the bulls are committed to new highs. In my view, a failed rally yesterday with no news until tomorrow and technical trade today argues for two-way action ahead of US data Friday. Bulls and Bears in the USD will both need to take advantage of what appears to be topping AND a pullback to support. In my view, you need to look for correlation when considering the potential for a near-term top to form and there is certainly correlation in the USD. Today’s strength was across the board in all the majors and therefore the weakness will be too. Look for the USD to complete a correction the next 24 hours. Heading into the weekend I think the USD longs will lighten up a bit.
EURO/USD Daily
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R3: 1.3480
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R2: 1.3450
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R1: 1.3420
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Current Price : 1.3378
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S1: 1.3350
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S2: 1.3300
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S3: 1.3250
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Some evidence of topping at this price area, run-up to the high print saw volumes drop off on the move traders say. Price pattern almost an outside day reversal but technical support may underpin for part of the overnight session. A sharp and fast break would be a buying opportunity in my view, aggressive traders can sell strength but better play is to buy dips.
USD/JPY Daily
Futures
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R3: 8680
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R2: 8610
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R1: 8580
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Current Price : 8561
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S1: 8540/50
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S2: 8500
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S3: 8480
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Light volumes in cash suggest that the interest in Yen sales may be declining despite the renewed interest in the carry trade. Traders note that new carry trades were being placed but not in volume suggesting the market may rally further. Look for the 100 bar MA to support on any break lower, aggressive traders can BUY futures for a test of the highs.
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Jason
Jankovsky
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