Afternoon US Dollar wrap-up
The USD continued to gain overnight
against the majors before hitting liquidating stops under the pairs
during New York trade; setting highs for the day early. Traders say that
volumes dried up to a near standstill shortly after the release of minor
better-than-expected ISM data and the pairs languished near their lows for
most of the session. Late trade saw the majors get a lift higher as poorly set
shorts were forced to cover but net on the day the USD has nice gains.
Analysts remind that support/resistance across the board is holding at some
key levels and due to the two-sided nature of technically-driven trade it is
possible that the USD could retreat further as the pairs rotate back to the
other end of recent trading ranges giving both bulls and bears something to
work with.
Into the low print of 1.8793, cable found bids mixed with
wider stops and rumors of semi-official names surfaced as the rate stabilized
just above the 1.8800 handle. Unable to trade convincingly under there, the
GBP rallied back to the 1.8850 area in late trade on short-covering mixed with
long-term accounts traders say. Real money accounts were also seen in EURO
some desks report, trading into the 1.2780 area but as with cable finding good
demand from large names and EURO also managed a late rally back to the 1.2810
area before the close. Traders say that in both pairs, the unwinding of non-USD
crosses likely was the initial push lower for the EURO and GBP but once stops
were triggered both rates were able to make a sharp liquidating break into the
lows; some traders note that with poorly set longs off the table the EURO and
GBP are set to try for highs again but expect the action to be two-sided and
range-bound without fresh fundamental news of consequence.
USD/JPY also staged a nice rally, clearing stops layered
above the 116.30 area and 116.60 area but found willing offers ahead of the
116.80 area of previous support. Traders note that hopes for a BOJ rate hike
this week are fading and some feel that the recent Yen strength may not have
much more to go. Sellers included the usual suspects of exporters and large
Japanese banks. In my view, the USD has had a few days of relative strength
but the technical picture remains overall bearish and I think if this week has
been the extent of the liquidation needed for the majors to continue advancing
against the USD, then we are set for a test of the highs before the end of the
year now. I would be looking for continued two-sided trade the next few days
and on into early next week as the pairs set-up for an advance near-term.
EURO/USD Daily
R3: 1.2920
R2: 1.2880
R1: 1.2840
Current Price : 1.2819
S1: 1.2780
S2: 1.2760
S3: 1.2720
Pair finding support at 100 bar MA as expected, late lift
suggests that the correction is over, look to cover existing shorts and buy a
pullback to the 1.2740 area if we get it. Long wick at trend line support and
close above the MA’s suggests that smart money was on the bid late taking the
selling pressure to initiate. Look for quiet two-way trade but higher prices
near-term.
USD/JPY Daily
R3: 8740
R2: 8690/8700
R1: 8610
Current Price : 8591
S1: 8550/40
S2: 8500
S3: ?
Lack of follow-through suggests that the bears are still
willing to offer Yen into the hole, look for two-way action tonight with lower
prices soon; cover existing longs and look to reposition on a test of the lows
if we get it. Pair still heavily short but a corrective rally may be a few
more sessions away; look for 8540 area to hold on a pullback but a great buy.
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