Afternoon US Dollar Wrap-Up

After a fairly typical overnight session that showed a lot of two-way interest in the USD the Greenback settled down to a low-volume New York session as the markets continued to debate the near-term direction for wounded Yen carry traders. Initially starting firm in Asia the USD came under a bout of selling through Europe as some players squared positions ahead of the ECB General Council meeting due up Thursday but traders note that existing support and resistance continue to underpin near-term direction ahead of US data due Friday.

Most analysts feel that the widely expected 25 BP rate hike signaled by the ECB almost 6 weeks ago is well factored into pricing and only the interpretation of the statement and press conference will have much of an impact on the prospects for EURO/USD. Yen carries continue to dominate Asian trade and good demand for Cable and USD vs. JPY gave the overnight market s distinct “correction” feel as the USD sold off against GBP and EURO but firmed against the JPY.

GBP held firm above the 1.9300 handle for most of the late New York session after breaking into close-in stops after an initial rally to start Europe; bids reported from Asian semi-official and Eastern European names traders say. EURO fell in sympathy but quickly regained a footing in New York trade and eventually making highs in the day into the IMM close this afternoon; traders note that the rate has traded the 1.3100 handle everyday but two since Feb 14 and before the start of the “Yen carry liquidation” while all the other majors have had multiple handles of both volatility and closes suggesting that the EURO is the most firm and secure major at this time and may be attracting extra buying due to it’s relative stability. EURO has close in stops rumored at the 1.3180 area and today’s high print is 1.3187 with no increase in volume or price suggesting that the stops may be a bit farther out.

USD/JPY is firm at 116.40/50 area after a rally to the 116.90 area overnight with offers from exporters capping the breach of the 117.00 handle. Failing any surprise the next 48 hours a test of resistance at the 117.20 area is likely; stops said to be mixed with offers above so expect volatility. In my view, today was a normal low-volume corrective day ahead of major fundamental news. What the market does with the news is more significant and due to the USD weakness this week and lack of follow-through I suggest that the USD will fall into Friday’s close while correcting the oversold condition in JPY. Look for Asian trade to lead tonight.


R3: 1.3240/50

R2: 1.3220

R1: 1.3200

Current Price : 1.3186

S1: 1.3150

S2: 1.3120

S3: 1.3100

Pair closing above fib defense at 1.3160 area significant in my view, rate looking to challenge reported offers and mixed stops atop the 1.3200 area or so. Likely for a short-covering rally should US data disappoint on Friday; ahead of that the ECB announcement is factored in I feel but the wording could be hawkish; rally through 1.3220 likely to improve bullish enthusiasm.


R3: 8720

R2: 8700

R1: 8640/50

Current Price : 8614

S1: 8550/60

S2: 8500

S3: 8480

Rate confirming two-bar reversal and challenges trend line support at 8550 along with fib defense at that price. Look for a bounce and today’s action will likely be repeated overnight so look for early weakness followed by strength. OK to ADD to existing shorts at 8620 area or so for aggressive traders.

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