Afternoon US Dollar Wrap-Up
The greenback continued in two-way trade ahead of US data tomorrow; today’s action confined to established ranges for the most part with the exception of GBP. Cable scored an impressive gain against the USD today as traders bought GBP and GBP/JPY in large amounts eventually rising to the 1.9500 handle overnight before a bit of profit taking ahead of US data. Higher than expected UK CPI data was enough to drive the GBP into close-in stops; traders note that late highs in New York after the London fix were most likely poorly placed shorts being liquidated. Also of note in GBP was the presence of model accounts buying the rate into the highs suggesting that the rate may be ready to rotate lower. Today’s US housing starts data was of no help to the USD even though it came in higher than expected.
I think the USD has some structural issues and one report does not a trade make; analysts remind that the Fed is ‘on hold†and it will take a whole lot of better-than-expected numbers to break the Fed loose for either a rate hike or a rate cut. Fallout continued from the PBOC rate announcement today as the BOJ left rates unchanged again and Fukui reiterated that the BOJ is in no hurry to raise rates. Citing the need for “appropriate†data and timing, Fukui reminded reporters that it is in the best interests of Japan to remain focused on the needs of the economy moving forward.
USD/JPY initially fell for a low print at 117.30 area after starting firm ahead of the rate announcement USD/JPY rallied on importer purchases into close-in stops eventually making a high print at 118.02. During New York trade the rate fell through opening ranges and into new lows for light stops said to be resting in the 116.80/117.00 area. Low prints at 118.79 were enough to contain the very light volume sell-off. In my view the USD is range trading and you can expect a rotation lower during the next few days. Most technical levels are remaining in play and there appears to be nothing that will break the USD out of recent ranges in the near future. Look for existing S/R areas to hold and aggressive traders can attempt to capture both sides of the existing ranges.
GBP/USD Daily
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R3: 1.9740
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R2: 1.9700
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R1: 1.9650
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Current Price : 1.9612
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S1: 1.9560/80
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S2: 1.9520
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S3: 1.9480
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Rate rallies through important resistance and trades into stops layered above the market but offers layered in as well; traders note that the rate is into technical resistance areas from potential pennant formations and also previous are where heavy selling was attracted. Look for inside range day closing lower tomorrow. OK to lighten up on longs but avoid looking for a short position.
USD/JPY Daily
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R3: 8700
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R2: 8680
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R1: 8650
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Current Price : 8626
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S1: 8600
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S2: 8560
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S3: 8520
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Rate probes for stops below the current support area and finds no one home suggesting the rate was testing for supply; higher close on the day is positive for the most part but the lack of follow-through to remain at highs suggests caution on your long positions. Look for a test of the 8700 area near term. BOJ rate announcement no factor but pressure there to the upside from China.
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Jason
Jankovsky
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