Afternoon US Dollar Wrap-Up

The greenback is lower again today against the majors for the most part and even the stubborn USD/JPY had a lower close. Traders continue to see a cautious downside potential to close out the week after today’s technical gains by the majors but caution that the risk of high volatility due to tomorrows US data is increasing. Overnight the USD began to slip in early Asia but remained range bound into European trade. UK data gave the GBP an early lift and persistent buying in the EURO by Eastern European names supported both pairs consistently as the “buy the dips” strategy continued in full force.

Early New York trade saw the ECB hold rates steady but the post-announcement press conference again saw ECB President Trichet verbally signal a rate hike for June was on the table. Although his rhetoric did not include the traditional “strong vigilance” remarks the overall tone of the statement and Q&A was decidedly hawkish. Resistance at the 1.3480 area gave way in EURO ahead of the London fix for a high print at 1.3504 before selling emerged. Although EURO fished off the highs the rate is holding firm at the 1.3480 area suggesting that what was once resistance is now support giving traders a cautious bullish stance into tomorrow’s US data.

GBP held gains as well and high prints at 1.9814 nearly equaled the 1.9818 high earlier in the month and some analysts are advising that a double top” may be in. Traders note that volumes in both EURO and GBP were moderate and lot’s of today’s action was active trade with only close-in stops either way fueling the highs or the lows. In my view, the very large stops for larger, more well-funded accounts are still out of range at this point. I would look for a run at the stops above the market in the next 24 hours.

USD/JPY continued to languish in an established range, today’s highs did not find the stops rumored to be resting above the 119.50 area and a fast reversal to the lows at 118.79 resulted ahead of the London fix. Holding the 119.00 handle into the close traders note that the record highs seen in EURO/JPY and the firm GBP/JPY as well as other Yen cross-rates is likely holding the USD/JPY firm for now. Traders also say that pressure near the highs or anywhere above the 119.30 area for that matter were from Japanese names and exporters suggesting that the USD/Yen has taken a lot of selling the past four days and likely stops are close-in underneath the 118.70 area. If those are triggered you could see a hard and fast break in the pair. Overnight should be modest ahead of US data Friday.

USD/JPY Daily

Inside day closing higher today is inconclusive for either direction in my view. Closes below the 50 and 100 bar MA’s suggests sellers still in control but they aren’t able to force resumption of trend at this point. I US data disappoints the USD bulls stops said to be building in the 8550 area may be triggered forcing a short-squeeze. Close over the 100 bar MA needed tomorrow.

EURO/USD Daily

Rate powers higher on active buying, only light stops reported on the way over 1.3500 traders say. Risk of a correction is growing higher and longs should be scaled out heading into the weekend. Aggressive traders can buy puts against open longs. Stops likely under the 1.3480 area and again under 1.3400. Close over 1.3500 Friday suggests another round of buying next week.

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Jason
Jankovsky

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