Afternoon US Dollar Wrap-Up
The USD is mixed to end New York trade this
afternoon after overnight data gave the USD bulls a pause. Japan GDP data came
in a better-than-expected annualized 4.8% gain sending the carry trade crowd
to the sidelines in Asia. USD/JPY had a pullback through reported stops in the
119.80 initially but traders note that at least once sovereign names were seen
supporting the USD and the pair held the 120.00 area into the New York open.
Disappointing US TICS data threw some cold-water on USD recovery hopes; a
modest 15.8B in sales to foreign investors was not enough to cover the 61.8B
trade deficit number released earlier in the week. Traders again sold USD/JPY
into reported stops at the 119.50 area and once the low print of 119.36 traded
the shine was off the bulls horns for the day. The USD/JPY continued to grind
lower eventually making new lows late in the session after the IMM close
leaving the rate within striking distance of the 118.00 handle tomorrow.
Technicians remind that if the rate were to close right here tomorrow this
week would be an outside bar engulfing reversal week from the 2007 high in the
USD; extremely bearish formation near-term.
Should the USD/JPY remain under pressure
tomorrow it will likely be met with solid technical selling next week making a
strong case for the top in the USD to be in for the quarter. In the other
pairs trade was more modest but mixed. Cable is lower while EURO is firm; UK
home sales data was lower than expected and cross spreaders were active
liquidating the GBP crosses keeping the GBP under pressure across the board.
EURO is looking a bit firmer but still will likely suffer a pullback tomorrow.
A test of the EURO breakout is likely in my view. Look for the USD to remain
under pressure but all the majors likely to adjust their crosses to end the
week. I would look for a rally in the USD near-term to be a seller on any
strength; deeper lows are coming in my view.
USD/JPY Daily
R3: 8500
R2: 8490
R1: 8440
Current Price : 8421
S1: 8380
S2: 8320
S3: 8280
Sharp rally on sentiment change possible but
one thing for certain is a lot of stops were triggered leaving the shorts in a
“get me out†position. Due to the magnitude of the short position the short
squeeze is likely far from over. Look for follow through rally, 50 bar MA
likely to offer a pause but not serious resistance. 8500 area likely to offer
good resistance but stops are likely layered all the way up to 8680 area.
EURO/USD Daily
R3: 1.3300
R2: 1.3250
R1: 1.3200
Current Price : 1.3163
S1: 1.3120
S2: 1.3080
S3: 1.3050
Rate trades higher but encountering a pause at
technical resistance. Look for a pullback near-term to end the week, V/OI
likely to show potential topping at least for now. A test of the breakout is
healthy so a fall back is likely a buying opportunity. Look for stops to be
light and volumes light on a pullback to end the week. Charts are sufficiently
bullish in my view to draw longs back next week.
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