Afternoon US Dollar Wrap-Up
After a slow start overnight the USD broke
sharply during European trade and remained under pressure all day during New
York trade eventually finishing off the lows for the day but doing a bit of
technical damage to the studies. Traders report that many long USD accounts
were caught wrong-footed at the start of US trade and a bout of USD
long-liquidation ensued pressing into stops that were thought to be out of
range. Worse-than-expected UK CBI data suggesting that inflation is not really
under control in the UK sent buyers into the GBP en masse along with
cross-spreaders for Yen; cable scoring a high print as stops over the 1.9850
area were triggered by shorts getting out of long-term positions. High print
in GBP at 1.9917 the highest price in GBP since February 1991. Traders expect
that near-term sentiment will be corrective and expect the rate to find
willing long-liquidation on this rally to end the week. BOE minutes are out on
Wednesday and traders suggest that it will not be super-hawkish but a little
dovish. Volatility certainly was in play in cable as the rate finished over a
full handle off the highs.
EURO initially tracked cable higher but stops
were triggered over the 1.3010 area and a high print at 1.3047 was all the
bulls could manage today. Analysts remind that EURO is significantly less
volatile than GBP lately and cross-spreaders likely will keep the rate
contained to earlier ranges between 1.2880 and 1.3100 so the upside may be
limited for the pair. Speculation that the ECB will hike rate no later than
March continues to underpin EURO but more important is the inflation picture
in the Euro-zone. Look for additional inflation data to stimulate the hawkish
rhetoric near-term. USD/JPY continues to remain firm despite the higher prices
against the Asian currencies. BOJ governor Fukui spoke today and his remarks
were seen as USD bullish near-term. Traders still see heavy resistance at the
121.80 to 122.00 area but some solid selling of the rate was seen for a low
print early New York of 121.10; stops under the 121.00 area left intact for
now. In my view, tonightâ€™s State of the Union speech by President Bush will
contain clues for near-term USD direction. Already in the mix is an increase
in the Strategic Petroleum Reserves and additional troops for the Iraq war.
Both have USD negative implications in my view so expect volatility around the
speech. Look for the USD to firm overnight and remain two-sided for Wednesday.
Current Price : 1.9821
Rate falling back on potential â€œfirst through
the evenâ€ trading; likely longs lightened up or liquidated completely on this
move into stops and contract highs. Sell-off very possible to end the week.
Aggressive traders can sell anytime and look for a weak close to end the week.
Uptrend likely over near-term but bounce off 1.9500 area possible should
market fall in price. Look for two-way consolidation the next 24 hours.
Current Price : 1.3058
Expect a bit of back and fill but uptrend is
secure in my view, look to ADD to open positions on a slight dip after two-way
trade this Wednesday. Expect pressure at the 50 bar MA also and aggressive
traders can look to sell into the 1.3100/10 area; rumors of heavy offers from
sovereign names in that area. Long-term traders can buy dips for the pull, new
2007 highs coming in my view.
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