Afternoon US Dollar Wrap-Up
The Greenback is mixed at the New York close after starting overnight on the defense initially. Remaining well-bid into the European session the Majors began to slide off as traders continued to unwind Yen carry trades keeping pressure on the USD/Yen and adding weight to the GBP and EURO as those Yen carries were liquidated; the USD rising by default in those pairs. Traders note that some of the MOF in Japan spoke to reporters that the Yen carry was no threat to Japan’s recovering economy, leading some to feel that the USD is set to rally again as brave souls decide to exploit the carry at current USD/JPY carry.
Today’s ISM Index came in at a sharply-higher-than-expected 59.0 causing a mild panic in the pairs; USD rallies into highs against the CHF, GBP and EURO while taking a bite out of the exhaustion rally in JPY. Analysts remind that the size and scope of the Yen rally has surprised many with the volatility and distance and warn that a corrective USD rally would not be uncommon given that tomorrow is Friday and USD shorts have a large potential profit at risk.
Tomorrow’s Michigan Sentiment may also surprise to the upside and traders warn that there have been a number of surprises to the fundamental USD picture of late so the potential for a USD rally is a bit larger in my view. For the day, it appears to me that the USD is over-sold against the JPY after today’s sharp break to the 116.95 low was immediately bought hard and the rate stayed above the 117.50 area for most of the day negating the stops under there. I would look for the USD to rally into Friday; most likely a short covering rally but there is a lot of upside there. Aggressive traders can look to be long under 117.50 with confidence.
EURO is under the 1.3200 handle at the close and looking to probe for stops under the 1.3150 area near-term. I would look to buy a break back to the 1.3080 area near-term. GBP is also off the highs and under the 1.9600 handle; lows at 1.9550 area left stops intact but if EURO weakens further it will likely take cable with it. Look for GBP to weaken into the end of the week.
USD/JPY Daily
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R3: 8600
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R2: 8580
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R1: 8550/60
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Current Price : 8528
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S1: 8500
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S2: 8470
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S3: 8420/30
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Rate manages a brief show into resistance at the 50% fib defense, look for a sell-off to close the week. Traders who are looking for a short term trade can short at 8540/50 area for an objective under the 100 bar MA. Look for a solid drop in OI today and tomorrow, COT data Friday should look for a drop in speculative short positions.
EURO/USD Daily
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R3: 1.9700
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R2: 1.9660
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R1: 1.9620/30
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Current Price : 1.9596
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S1: 1.9550
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S2: 1.9500
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S3: 1.9480
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Classic candlestick formation yesterday confirmed today with a lower price action; rejection of the attempt to find stops above the 1.9660 area. Stops likely building under the 1.9500 area and 1.9480 area, look for a sell-off to gather speed at 1.9550 area where light stops are also reported. Pennant may fail to the downside.
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Jason
Jankovsky
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