Afternoon US Dollar wrap-up
After an uneventful two-sided
overnight session that saw the USD both higher and lower against the majors,
traders bought USD heavily after the much anticipated US Philly Fed Survey
boosted confidence that the US Fed will still need to continue the tightening
cycle. Forecast at 8.3, the released number showed a much better economic
picture than expected with a reading of 18.5 showing the manufacturing sector
is continuing to advance.
Some analysts are no factoring an additional probability for
the Fed to tighten credit again in Q4 but still see a continued pause at the
next meeting. After the news was out, the USD began to gain on the majors
until a strong sell-off developed pushing the majors back to lower prices. On
the day, the GBP was the biggest loser trading to a low print at 1.8820 and
erasing 100% of the gains seen from the upside breakout driven by NFP two
weeks ago. Traders report that stops were elected under the 1.8915 area and
more at 1.8870 area. Active selling was seen above the 1.8940 area that
started the move and traders expect a small bounce from the lows today but
also that the bounce will attract more active selling.
EURO also lost ground trading down to the 1.2811 before bids
became active but stops were left intake under the 1.2800 handle suggesting
there is more downside room for the EURO to end the week. USD/JPY rallied
impressively to 116.19 high print before technical sellers emerged to cap the
rally. Stops above the 116.30 area are intact for now but traders warn that
follow-through short covering could create a rush through those stops during
the overnight session. In my view, the USD has begun to correct higher with
some authority now that the late shorts are covering and new longs are coming
in. It is likely that the Greenback will have some solid two-way trade to
consolidate these gains near-term but with no real fundamental news to digest
until late next week, traders will likely look to buy dips in the USD at
numbers that were broken through today. Look for the majors to continue to
trade with a heavy tone Friday and no real upside to end the week. A reversal
is in the works near-term and several hundred points of potential still remain
in my view. Aggressive traders can buy 115.50 area in USD/JPY on a dip, also
sell GBP/USD on a rally to 1.8890.
GBP/USD Daily
R3: 1.9050
R2: 1.8940
R1: 1.8890
Current Price : 1.8857
S1: 1.8820
S2: 1.8770
S3: 1.8700
Pair completely gives back gains from late buying on NFP two
weeks ago, correction potential is now huge for a move to the 1.8700 area as
long-liquidation gains momentum. Look for volumes to begin increasing and for
OI to drop significantly as the rate drops lower through previous support.
Stops said to remain under the 1.8820 area and a close under the 1.8800 handle
brings 1.8650 in view.
USD/JPY Daily
R3: 8770/80
R2: 8750
R1: 8720
Current Price : 8659
S1: 8620
S2: 8600
S3: 8550
Pair giving back early gains as 50 bar MA comes into view
and offers upside resistance. Long liquidation likely as stops fired off under
the 1.8650 area, close below yesterday’s close suggests that active
short-selling may have been the rule today. Look for a continued grind lower,
sell rallies and the 8700 area is particularly attractive if it trades.
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