Afternoon US Dollar Wrap-Up

The USD is mixed in corrective two-way trade after a quiet start overnight dominated by active JPY cross spreading. Although the Yen crosses have been in a liquidating mode traders now feel confident that the large break in the USD/JPY was a corrective one and shrewd traders have likely been using this break to sell higher priced Yen before re-setting their carry trades. USD/JPY is holding onto gains of a full Yen as New York trade winds down and with a firm close over the 116.50 area the rate may be closing in on rumored close-in stops said to be at the 117.00/20 area. Traders note that volumes were better in Asian and European trade and that argues for more action in higher volume while the US is “closed”. Looking ahead for the USD there is little on the table tomorrow as far as news and traders do not expect the Fed’s Beige Book to say anything market moving tomorrow leaving the USD/JPY vulnerable to the bulk of overnight interest ahead of New York trade.

Additionally, demand for other Yen crosses is keeping the GBP and the EURO well bid today suggesting that the USD will remain in mixed trade through the end of the week; traders argue for a rally in GBP ad EURO and a fall in the JPY. Cable today has held firm in solid two-way trade today making gains through the day to close back over the 1.9300 handle in moderate volume. The break lower this past 72 hours may have been the buy opportunity for the week as it may have been in EURO as well; EURO holding onto gains at the 1.3120 area late in New York trade.

Traders look for solid two-way action near term into the US data due Friday so I would expect the USD to cover a lot of the same ground twice during the next 72 hours. Lot’s of near-term opportunity as prices ebb-and-flow so should aggressive traders looking for near-term gains want to buy dips in the majors I think you will have a lot to work with into the NFP report on Friday. Across the board the USD is looking weaker but expect a recovery rally in USD/JPY as an opportunity to set quality shorts for the rest of the quarter. Look for the USD to weaken into the end of this week and maintain a weak tone through March.


R3: 8750

R2: 8690/8700

R1: 8620

Current Price : 8586

S1: 8550

S2: 8500

S3: 8480

Failure bar at a high suggests that sellers are aggressively selling into the highs; look for V/OI data to confirm a short-selling attempt by larger names. Stops likely resting under the 8550 area and lower but expect a bit of support from the 100 bar MA near-term. Should a massive break on high volume follow today’s weakness, potential for a test of the 2007 lows is very likely. If short, let it work.


R3: 1.9420

R2: 1.9380

R1: 1.9340

Current Price : 1.9314

S1: 1.9280

S2: 1.9250

S3: 1.9200

Bounce to be expected but now the rate needs to follow-through into the end of the week for this week’s drop to be a head-fake. Look for stops layered above the 1.9380 area of the 100 bar MA to have offers mixed in for two-way trade. If long, look to ADD to the rate on a pullback from the next high; hopefully a test of the 1.9420 area. Close over the 1.9420 area opens the door for a solid rally.

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