Afternoon US Dollar Wrap-Up

The USD is mixed to end the day today after a
bout of profit-taking by the USD longs corrected most of the majors with the
exception of the USD/JPY which remains unchanged. Traders note that cross
spreading of most pairs for Yen and liquidation of EURO/GBP spreads continued
to pressure the GBP higher while all the other rates remained within
established previous ranges. Overnight news was light and traders note that
Friday short-covering and long-liquidation likely had more to do with today’s
action than anything. Interestingly, model and momentum accounts continued on
the buy side of USD again today but the jury is still out on liquidation
issues seeing as the only major pair to rally significantly was cable scoring
a high print over the 1.9600 handle at 1.9609. Today’s Retail Sales number
came in higher than expected at +0.9% creating a brief bout of USD buying but
traders quickly sold into the rally and the major pairs all made highs on the
day shortly after the 8:00 AM CST hour remaining well-bid for the rest of the
day. Analysts remind that with a holiday shortened trading day today and US
traders off on Monday for the holiday, a round of USD long-liquidation is not
unexpected and technical barriers remain for a USD slide.

Next week is thick with market-moving and
closely w3atched economic news so volatility is expected to be a bit higher
and solid two-way trade may develop instead of this week’s one-way USD romp.
EURO remained inside existing ranges with a high print at 1.2946 in sympathy
with cable and likely would have done better if EURO/GBP spreads were not so
heavily liquidated today. Traders note that the rate is due for a correction
and has completed a significant correction today. Should EURO be able to build
on current strength analysts see scope for a recovery near-term into the
1.3000 handle. USD/JPY remains pegged at the highs near 120.40 area but
exporters, Japanese banks and speculators are thick on the offers above the
120.70 area. Look for the rate to begin correcting hard into the middle of the
week as speculation that the BOJ will hike rates at the policy meeting
Thursday is growing. US data due next week likely to confuse USD bulls and is
not expected to be overly optimistic. Look for the USD to slide for net losses
next week.


R3: 1.9680

R2: 1.9660

R1: 1.9620

Current Price : 1.9579

S1: 1.9520

S2: 1.9480

S3: 1.9440/50

Pair advancing on several factors but expect
consolidation early next week before another leg higher to end the month.
Close above the 1.9550 area argues for an extended rally into the 1.9700
handle. Also note that most of the previous selling pressure has been negated
by the last 48 hours of action suggesting the door is open to a test of the
2006 highs.


R3: 8450

R2: 8420

R1: 8400

Current Price : 8379

S1: 8350

S2: 8300

S3: ?

Rate could not have given a better buy signal
today in my view, “doji” star at significant lows and volumes suggesting
turnover. OK to reset open longs but with a holiday weekend it might be better
to wait until Tuesday’s trade. Look for a significant rally on BOJ news later
next week. Should the BOJ hike rates that would be a bit unexpected.

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