Afternoon US Dollar Wrap-Up

The USD is trading mixed today after a
generally quiet overnight session under two-way trade. Mostly on low volumes
the greenback continued to trade on follow-through strength early in Asia but
eventually feel into listless two-way trade into early New York. With little
to focus on in the way of economic news traders are looking for solid
technical trade to develop and maintain the USD in established ranges through
Thursday when housing data is expected to be USD supportive. Traders will
watch tomorrows’ State of the Union address by President Bush for clues to the
direction of Crude Oil prices as lower energy prices are seen as USD
supportive near-term. Most analysts note that the USD is overbought at current
levels so without a lot in the way of news until later in the week most
traders are cautious when positioning for another leg higher in the USD. In
the major pairs, GBP had a solid up day pushing to 1.9790 area after the
London fix this morning, traders note that cross spreading for Yen is very GBP
supportive and are expecting two-way trade to remain GBP bullish with higher
prices later in the week.

EURO continues to lag a bit but still firm at
the 1.2950 area in lighter trade today. German PPI data was below-expectations
suggesting that the ECB may not need to be aggressive on rate hikes moving
forward but comments by ECB governor Weber saying that the ECB must act “ahead
of 2nd round inflation risks” continued to keep the EURO bid all day. Traders
are expecting an ECB rate hike in February and will likely price in a 25 BP
rate hike soon. USD/JPY traded to another intraday high today, high print at
121.81 but as expected exporters and general USD selling by longs capped the
move; traders note that the USD/JPY is a bit pricey at these levels and talk
of a BOJ rate hike in February may set off a chain-reaction in the pair.
Cross-spreaders will likely keep the upside pressure on but the pair is
overbought no matter how you want to see it; a correction is coming in my
view. Look for the USD to remain range-bound and two-sided the next 24 hours.
Bush’s remarks tomorrow will provide some action but expect two-way trade


R3: 1.9850/60

R2: 1.9820

R1: 1.9790

Current Price : .19759

S1: 1.9720

S2: 1.9680

S3: 1.9620/30

Price at top of recent range and near previous
resistance; OK to close open longs or at least lighten up ahead of tomorrow’s
speech. Close above the 1.9800 area likely to increase risk of follow-through
buying but rate getting a bit overbought in my view. Expect double top at
1.9850 area should stops above 1.9800 get triggered.


R3: 1.3080

R2: 1.3050

R1: 1.3020

Current Price : 1.2985

S1: 1.2950/60

S2: 1.2910/20

S3: 1.2880

Rate inside range day closing neutral after a
solid “doji” star on Friday is inconclusive near-term and suggests that rate
will continue in solid two-way trade near-term. Look for stops to be close-in
and layered starting around the 1.3010 area to the upside and the 1.2930 area
to the downside. Support seems solid on dips so expect the 1.2880 area to hold
the bottom of this range.

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