Afternoon US Dollar Wrap-Up

Solid two way trade developed today in the USD but not before the majors scored one more round of highs overnight. The big news of course was the GBP which made a high print at 2.0135 in late European trade, a 26 year high before succumbing to a bout of long-liquidation. BOE minutes showed the MPC divided as to the next move on interest rates but traders took the cue that a rate hike is in the works and due maybe as soon as May. In addition to highs against the USD, the GBP rallied on Yen crosses as well but is short of a record for Yen so far. EURO scored another 2007 high before falling back for a high print at 1.3617 overnight but traders report that heavy selling was seen on the approach to the 1.3600 handle; stops above there were light but still resulted in a successful breach of option related defense at the figure. In both pairs the New York open saw pressure for the lows on the day but traders saw that as a buying opportunity and were able to stave off a further break. Rumors of Russian demand in EURO and Mid-East demand in GBP helped to keep the rates firm after the London fix.

USD/JPY and the rest of the major Yen pairs also were pressured as unwinds of carry trades began overnight Asia; USD/JPY fell through a few layers of reported bids for a low print at 118.58 before the start of New York. During the day waves of stops were reported on each new low suggesting that the rate has some nervous longs with close in orders working but the low print at 118.10 was still off the area of large reported stops at 117.80. A rebound to trade above 118.60 area attracted stops from shorts so no doubt people were whipsawed today. Analysts agree that the carry trade is alive and well but the risk appears to be on the heads of the new longs; older carries can risk a substantially higher Yen at this point so perhaps a range bound Yen is in the works through the quarter.

Adding to the support was US Equities in record territory which has fueled Yen selling as of late. In my view, the USD is due for an upside correction as the majors are at or near overbought areas. Aggressive traders can SELL GBP above the 2.0050 area in my view. The Yen unwinds will likely force a rally in Yen so an additional aggressive trade would be to SELL USD/JPY at current levels. Tomorrows’ Philly Fed data is likely to be benign or on the softer side so a bout of USD long-liquidation may result. Look for the majors to weaken a bit overnight.


R3: 8600/10

R2: 8580

R1: 8520/30

Current Price : 8496

S1: 8450

S2: 8420

S3: 8400

Rate pressures for stops above the 8550 area and gets a bit of selling, close over 100 bar MA significant. If rate can build on higher close potential is increasing for a short-covering rally. Stops likely over today’s highs and under today’s lows as late players remain nervous. Close back under 100 bar MA sets up more potential range trade in my view but I think downside is limited ahead of Friday.

/USD Daily

R3: ?

R2: 2.0150/60

R1: 2.0100

Current Price : 2.0058

S1: 2.0000

S2: 1.9960

S3: 1.9880

Rate score a 26 year high before faltering, doji star close indicates a point of indecision with sellers likely as stops are rolled up closer due to the failure at the high. Any mildly bullish US news or bearish UK news likely to start a stampede in my view, close over the 2.0100 area likely to draw last remaining late buyers. Shorts have the advantage in my view; aggressive traders can SELL current numbers.

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