Afternoon US Dollar Wrap-Up
The USD continued to advance slightly during
New York trade after firming yet again overnight, the USD is back at the best
levels it has been at for the week roughly depending on which major pair you
look at. The USD rally started in Asia overnight when Reuters accidentally
released a report on the Japanese CPI data early surprising the market into a
panic buying mode. Traders found stops close in on the buy side of the USD and
by the time the error was discovered and the actual Japanese CPI data was
confirmed the damage had been done; analysts are now looking at some critical
support/resistance numbers across the board for the USD and despite the
sentiment to “sell rallies†in the USD some analysts are saying that they may
have to rethink that position in view of the USD strength seen this week. The
big mover is the USD/JPY today, rallying back into the 121.60 area and
spending most of the day near the highs; cross traders are selling all the JPY
they can with hopes that the BOJ will do nothing to stop the Yen decline and
that rhetoric from Davos will remain USD positive.
The upcoming G-7 meeting in February is not
expected to address Yen weakness so traders feel that there will be a solid
attempt to tackle offers at or near the 122.00 area of major resistance. GBP
fell to technical support at the 1.9550 area, low print at 1.9555 before bid
appeared. Recovery into the 1.9600 handle was fast but the rate danced around
the 1.9600 handle all day and was very two-sided until the close. EURO fell
into key support at 1.2880 area where sovereign demand appeared again, low
prints at 1.2877 with a firm close over the 1.2900 handle. Traders note that
all the major pairs have held important S/R despite the volatility and news.
Today’s Durable Goods data and New Home Sales came in at better-than-expected
levels but the USD reaction was muted suggesting that a lot of positive USD
sentiment is baked in the cake. Next week is FOMC and GDP data and the markets
might be taking a ‘wait and see’ approach before attempting to take the USD to
further gains. In my view, the USD is setting up for a resumption of
downtrend. All the underlying fundamentals are there and until the economic
situation can fully challenge the market sentiment the USD will likely
continue to attract late buying. Look for continued volatility next week.
USD/JPY Daily
R3: 8380
R2: 8360
R1: 8320
Current Price : 8282
S1: 8250
S2: 8200
S3: ?
Rate falls back on further new selling; check
daily V/OI for a potential rise in open short position which needs to be
cleared. I still want to buy these dips and wait for the rally so I suggest a
buy under the 8300 area if not long already. Next weeks early trade likely to
be corrective ahead of US data mid-week.
EURO/USD Daily
R3: 1.3060
R2: 1.3020
R1: 1.2980
Current Price : 1.2943
S1: 1.2900
S2: 1.2860
S3: 1.2820
Textbook bounce off 100 bar MA and close above
50% fib defense argues for a ‘head fake†break down under developing uptrend.
Look for buyers to come in early next week in technical trade ahead of US rate
decision and data mid-week. Close above the 1.3000 area needed to take bearish
sentiment off the table.
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