Afternoon US Dollar Wrap-Up
Once again, the USD had massive two-way volatility
amid lower volumes leaving damage to the balance sheets of both bulls and
bears. Traders say that holiday conditions may be contributing to
the extremes in the Greenbacks’ trade but regardless of what is behind the
violent price action one thing is clear; you needed nerves of steel to trade
from either side this week. I don’t think it really mattered if you were a
bull or a bear for the past five trading days. Adding to the action today was
some fundamental data from both overseas and stateside. Overnight the BOJ
released the Tankan survey which came in about as expected; traders initially
sold USD/JPY as hopes for a BOJ rate hike improved for next week. After
remaining in a tighter range for most of the Asian session the USD began to
climb and eventually found light stops pushing the rate to the best levels of
the day ahead of New York.
The USD continued firm against all the majors through the release of US CPI
data. Forecast at +0.2% for front number and core, both numbers came out
unchanged and traders saw that as unfriendly to the USD. With a dropping risk
of inflation the US Fed is likely to be pressured to cut rates soon and
traders sold USD making new lows on the day across the board. Triggering stops
all the way down and volumes increasing traders say. Shortly after the release
of TICS data later in the day the USD found support and began to firm but no
one was expecting a complete reversal and new highs for the day. GBP had
rallied to the 1.9660 area on bearish CPI but then reversed on positive TICS
to trade under the 1.9500 handle shortly after the London fix. All told for
the day the GBP closed in the bottom 10% of the weeks range after trading into
the top 1/3 only an hour earlier.
Certainly volatility is an issue this week. EURO suffered even greater
volatility as the rally to start the day was followed by a new low; followed
by a recovery and then a subsequent new low; EURO finishes in the bottom 5% of
the days range and the bottom 2% of the weeks’ range. Both GBP and EURO were
caught wrong-footed on the unwinding of non-USD cross-spreading. USD/JPY was
also very two-sided but managed to keep the high/low range to less than 100
pips. Low prints at 117.40 area contained the downside while the 118.30 area
capped the upside. Still, the rate covered the same ground twice today as it
has several times this week. Look for volumes to really drop off next week as
holiday trade gets to full strength ahead of the Christmas holiday.
USD/JPY Daily
R3: 8720
R2: 8650
R1: 8620
Current Price : 8570
S1: 8550
S2: 8480
S3: 8450
Pair completes a technical sell-off to sketch out potential up channel
developing for a change in trend. Strong technical buy signal with price off
the 50 bar MA. Aggressive traders can BUY JPY right in here. Look for a few
days consolidation. Heavy week of data may inspire a bout of short covering so
be ready for larger volumes heading into end of year.
EURO/USD Daily
R3: 1.3320
R2: 1.3280
R1: 1.3190/1.3200
Current Price : 1.3133
S1: 1.3100
S2: 1.3040
S3: 1.3000
Rate falling through near-term support but also on light volume suggesting
the move is a head fake. Follow-through likely and traders expect more two-way
action to end the year. Book squaring and window dressing likely and traders
say a potential bounce will likely be sold as the “buy EURO on dips†strategy
has been severely dented this week.
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