Afternoon US Dollar Wrap-Up

After a quieter overnight session in Asia with the USD firm into European trade, short-term volatility was the rule for a few hours this morning ahead of the Easter weekend. As expected, the BOE MPC held rates unchanged today after analysts were placing about a 50/50 chance for a “surprise” rate hike. With the recent firmness in both the GBP and the Yen crosses some traders believe a 25 BP rate hike is already priced into the markets so the lack of a rate change may have been seen as a “disappointment” for cable. GBP opened firm-to-lower ahead of the news and broke a fast 60 points before immediately recovering and then dropping back to make another new low before rallying once again to close over the 1.9700 handle suggesting that resting bids were easily able to overcome both stops and active selling on the day. Traders feel that a test of the 1.9800/50 area of near-term resistance is likely should US data disappoint tomorrow; with a holiday shortened trading session on Friday volatility is likely to be quite large so traders without a solid lead on their trade may want to consider standing aside or at least lightening up on their position.

Helping to support GBP in some manner was the surprising performance of the soggy EURO lately; blasting through resistance at the 1.3410 area into reported stops at 1.3420/30 the rate made a high print at 1.3442 before settling down to trade all day above the 1.3410 area and volumes were a bit larger traders say. Good volume and a firm close above areas of reported/confirmed stops argues for an upside breakout and with the rate closing at a new two-year high it appears that the coiling of the EURO near-term has begun to unwind into further bullish hopes. Look for the EURO to trade still higher on poor US data tomorrow but upside may be limited to the 1.3480 area of technical resistance.

USD/JPY continues to draw support from active Yen carry and cross-spreaders but the lack of upside follow-through and heavy offers reported in the 119.00 area the near-term top for the rate may be in. Look for initial bounce from the 118.20 area but if volume is low on that rally continue working the pair from the sell side in my view. Aggressive traders can ADD to open USD/JPY shorts but look to cover over the weekend. Remember that in holiday trade moves can be exaggerated and choppy so run stops out-of-range.

EURO/USD Daily

Rate best performer on the board today and technically offering a strong upward bias but due for a pullback in my view, overhead resistance likely on a Friday anyway but now that the pair is into new contract highs sellers will be sniffing around very soon. BUY a correction but give it a few days to fall back to good support levels; in my view a pullback to the 1.3320 area is a strong buy.

USD/JPY Daily

Rate closing above the 100 bar MA is a strong buy signal in my view, 50% fib defense holding and sellers appear to be getting a bit scarce. Aggressive traders can ADD to initial or open longs but long weekend is a caution; PUTS are also an option against open longs. Look for volatility on US data; markets have shortened session so if you don’t have a solid lead consider going flat over the holiday.

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Jason
Jankovsky

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