Afternoon US Dollar Wrap-Up

After yesterdays sharp break in the USD today’s
action would be considered more subdued and potentially a recovery. Although
it will most likely take a few days for the markets to settle out from Tuesday
huge sell-off in the equities arena, the Greenback regained some poise today
and finished a respectable unchanged-to-higher after gaining a foothold higher
across the board during New York trade. The focus remains on the Yen crosses
and overnight remarks by BOJ board member Mizuno that the BOJ was “closely
monitoring” the effects of individual investor’s participation in the Yen
carry trade kept the JPY firm but lower on the day. Yen carry unwinds were not
as prevalent traders say suggesting that the bulk of yesterdays unwinds were
late buyers of the carry or panicky speculators as opposed to better-funded
traders. The potential for a USD/JPY rebound is growing and the high prints of
118.80 overnight were certainly impressive given the speed of the recovery,
later in New York a new high at 118.85 gave the USD bulls a bit of
encouragement and although the rate settled off the highs the technical
follow-through expected now has less potential in my view. Look for the USD/JPY
to rally into the end of the week or at least remain firm.

GBP held the 1.9600 handle but volumes were
light and not before solid selling under the 1.9600 area overnight. Today’s
action is more of a “hanging man” formation suggesting that the existing
technical picture of a potential resistance area at 1.9640 or so remains in
place. Traders note that the GBP was active on the Yen crosses also. EURO has
some downward pressure finding stops under the 1.3210 area overnight for a low
print at technical support of 1.3180; the bounce to close back over the 1.3200
area was on lighter follow and pending any surprises from remaining US data
the pair is looking like it will retrace to end the week. Across the board the
USD break has found buyers suggesting that once traders are done licking their
wounds from Tuesday they will likely remain on the buy side of the USD
near-term. Trading from the short side has failed to follow-through suggesting
that the Greenback still has a bit of bullish enthusiasm to finish out the


R3: 8580

R2: 8550

R1: 8500

Current Price : 8471

S1: 8450

S2: 8420

S3: 8400

Rate falling back a bit on an inside range day
closing lower as expected. Look for the Yen to break lower overnight and test
the rally point near the 50 bar MA near-term. Traders note that model/momentum
accounts were active on the buy side late yesterday suggesting that the rally
is weakening. OK to buy a pullback but the volatility will be high so be
nimble with new long positions.


R3: 1.9700

R2: 1.9680

R1: 1.9650/60

Current Price : 1.9635

S1: 1.9600

S2: 1.9550

S3: 1.9500/10

Not much change of a continued rally on
follow-through, studies turning neutral to overbought and today’s pattern is
clearly a negative signal. Some support seen from pennant base area but that
likely to be challenged during ISM data tomorrow. Traders note that volumes
have been very light on the climb higher from the stab lower overnight.

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