Afternoon US Dollar wrap-up
The USD is mixed to start this
holiday shortened week; lower against the Yen but firmer against
the EURO, Swissy, and GBP. Overnight Asia and during Monday’s trade the
cross-spreaders were very active booking gains from their “Long Europe/Short
Asia†play that saw the EURO/JPY and the GBP/JPY reach new all-time high
prints in recent days before finally succumbing to a round of profit taking
putting downside pressure on the European side of the crosses.
The biggest mover the past 24 hours as the US gets back from
the Labor Day holiday is the USD/JPY falling quickly as the Yen gained
elsewhere on the lifting of crosses; low print 115.55. EURO traded down to
near-term support at the 1.2790 area but finding no stops in any size to drive
the pair lower; cable also dropping hard into the 1.8910 area after the start
of US trade and likely tracking EURO lower more-so than outright selling. One
item of note is that model and momentum accounts were seen on the sell side of
the EURO and the GBP; perhaps establishing positions looking for
follow-through; should the USD fall tomorrow a return to the near-term highs
would offer a good selling opportunity. All the major pairs continued to
respect established upside and downside technical support/resistance areas
suggesting that the lack of fundamental news has given way to technical
trading in lighter volumes.
The next few days sees a round of Non-US fundamentals so
traders likely will square positions ahead of Thursday; the BOE holds their
MPC meeting as does the BOJ and traders expect no change in rates this round.
The market appears to be pricing in a 25 BP rate hike by the BOE for October
and the BOJ sometime after the first of the year. In my view, today is simply
“business as usual†after a holiday. The US has a light calendar this week so
a bit of two-way trade is likely ahead of US news due on Wednesday and
Thursday. Wednesday is the US Fed’s “beige book†and Friday is consumer
credit; both are not expected to draw a serious look but traders remind that
when a market is nervous it tends to become a bit more two-sided and
volatility tends to increase. Look for the USD to open weaker on Wednesday;
volumes should be on the lighter side.
USD/JPY Daily
R3: 8720
R2: 8710
R1: 8680/90
Current Price : 8640
S1: 8600
S2: 8550
S3: 8500
Great two-way trade suggesting a bottom may be in near-term;
any hint that the BOJ may make a change to policy could easily ignite a
massive short-covering rally. Look for first attempt at 8690 area of 50 bar MA
to draw selling but a close through there likely to fuel the move. Stops under
8550 area remain intact; watch for volatility to increase on approach to 8550
area.
EURO/USD Daily
R3: 1.2920
R2: 1.2880
R1: 1.2850
Current Price : 1.2828
S1: 1.2800
S2: 1.2780
S3: 1.2720
Pair continues to sketch out a near-term top in my view,
look for continued two-way trade but with a higher open in New York on
Wednesday. 50 bar MA at 1.2780/90 area likely to offer good support on a
sell-off so watch for larger range the next few days. Upside limited to 1.2920
area which would likely be a strong sell; stops above 1.2920 and below 1.2750
area.
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