Afternoon US Dollar Wrap-Up

Although the USD got some strong bullish news
this morning, the Greenback was unable to build gains and sold-off most of the
day in what must have been a frustrating session for the USD bulls. Starting
steady to mixed overnight, the USD found willing offers atop the 118.20 area
in USD/JPY after the BOJ announced there would be no rate hike this month;
traders note that conditions were thin but exporters were active. Falling
after the start of the European session as better-than-expected German IFO
sentiment showed a record high business confidence reading; both EURO and GBP
were able to advance into areas of reported close-in stops adding to the
available volatility. Opening New York under pressure the USD continued to
mark time until the release of record PPI numbers and stronger-than-expected
home starts. Initially a flurry of USD buying emerged but the technical
support/resistance levels held across the board and the USD began to slide off
for good this time and rotated back to the other end of recent trading ranges.

USD/JPY fell back to the 117.80 area twice the
past 24 hours suggesting that the largely two-sided market is not going
anywhere until after the holiday-thinned market comes back full force. EURO
managed a brief show over the 1.3200 handle for a high print at 1.3217 before
technical sellers emerged after stops triggered over the 1.3200 area; dropping
back to the 1.3190 area in super-thin trade. Perhaps to underscore the
volatility in EURO recently Citigroup today announced a short-term EURO short
from the 1.3200 area with a downside target at 1.2600 but in my view the
1.2600 handle is out of range for the year. Cable topped the 1.9700 area for a
high print at 1.9704 before willing sellers emerged; GBP now at the technical
resistance level sold heavily each of the last visits here.

Although PPI registered the highest front
number since 1974 at +2.0%, the fact that the USD was unable to rally securely
underscores the inherent weakness in the USD for the pull. I think smarter
money traders see that one month of data does not reverse the sentiment of a
market the size of the global FOREX market and that it will take many more
months of similar data to suggest that inflation is a real concern to anybody.
Look for the USD to continue to range-trade in solid two way action this week
as we head for the holiday weekend. Technical selling of the majors would be
reasonable tonight ahead of Wednesday with no real news due.


R3: 1.3340/50

R2: 1.3300

R1: 1.3260

Current Price : 1.3248

S1: 1.3200

S2: 1.3160

S3: 1.3120

Rate rallies on thin conditions and volatility
but still makes solid progress on the week. Look for a pullback to firm at
1.3200 even in thin conditions; a close over the 1.3300 handle likely to draw
additional momentum traders. Some weak chatter of model and momentum accounts
on the bid at the highs but the firm close today suggests they may be on the
right side of this one. Buy dips but expect volatility.


R3: 8660

R2: 8620/30

R1: 8600

Current Price : 8572

S1: 8540/50

S2: 8500

S3: 8450

Pair completing a full test of potential change
in trend, holds above the 50 bar MA after retreating, and also completes a
technical hook reversal; although not as strong as some. Selling pressure
continues at the 8600 area but that will weaken in time as shorts roll stops
close-in I believe. Look for a sharp rally near-term should any of the
upcoming data disappoint USD bulls further.

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