Daily Analysis - 09/02/2009


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Overnight Asia/Europe

• USD two-way in light trade overnight
• Stops seen in-range with most pairs
• No real market-moving news overnight

Today’s Economic Reports
All times EASTERN (-5 GMT)
• None—light calendar for everyone

Looking Ahead to Tuesday
All times Eastern (-5 GMT)
• 9:00am USD FOMC Member Dudley Speaks
• 10:00am USD Treasury Sec Geithner Speaks
• 10:00am USD IBD/TIPP Economic Optimism
• 10:00am USD Wholesale Inventories m/m
• 1:00pm USD Fed Chairman Bernanke Testifies

The USD opened flat in Asia today trading in tighter ranges in two-way technical action; lack of market moving news kept traders interested in previous S/R in the major pairs. Driving a lot of early trade was interest in the Yen crosses; USD/JPY opened better but failed to hold gains as EURO/JPY slid off during the overnight session. High prints in USD JPY at 92.42 with lows at 90.88 suggesting offers are thickening up a bit. Traders note exporters selling into the highs in both pairs suggesting that the rate has topped for now. Economic news in Europe was also light with most pairs extending their gains against the Greenback in two-way action. GBP low prints at 1.4700 came early in the day with highs in late Europe at 1.4938; traders note some stops in-range around the 1.4880 area and slightly above. Analysts note that the rate is closing in on the psychological 1.5000 area and expect at least one pullback from that area if it trades. EURO is also firm in two-way trade; high prints at 1.2993 with lows at 1.2873 holding Friday’s range. Forex traders note that last week’s comments by ECB President Trichet suggesting that “zero interest rates would not be appropriate” have underpinned the rate a bit despite the increased probability of a rate cut in March. Even if the ECB cuts rates next month, with the US Fed already at quantitative easing and expected to remain there for some time, the interest-rate differential (although small) still favors the EURO PLUS the Europeans likely will emerge from an economic downturn faster. In my view, the underlying fundamentals favor capital flow into the EURO over time and with the USD artificially higher due to panic buying last year; I think it is highly likely the USD will fall against the EURO this year. USD/CHF fell back to key support again overnight; low prints at 1.1588 are once again on technical support and the rate has bounced back onto the mid-1.1600 handle in early New York. High prints at 1.1682 area under last Friday’s highs and traders note that offers are waiting on any approach to the 1.1700 handle near-term. USD/CAD dropped off recent highs for low prints at 1.2127 finding stops under the 1.2220 area as expected. Rate is back on the 1.2200 handle and pressing towards the 1.2300 handle suggesting whipsaw remains in that pair. High prints overnight at 1.2301 and the rate is trading 1.2280 area in early New York. In my view, the Greenback is continuing to sketch-pout a top in current price areas. Technical two-way action with large volatility is often common at market turns; the big question is if the USD is ready to reverse after a modest correction lower. Look for the Majors to hold gains into mid week as the calendar s light until then and traders are on the bid to start the week.


Resistance 3: 1.5000/10
Resistance 2: 1.4980
Resistance 1: 1.4920/30
Latest New York: 1.4871
Support 1: 1.4320
Support 2: 1.4250/60
Support 3: 1.4200

Rate firmer again overnight, opens New York near the highs; two-way overnight tests S/R both ways. Technical trade the rule to start the week with cross-spreaders holding GBP firm. Rate needs to hold above 1.4700 area to keep bulls happy. Statement suggests that the BOE is not happy with a lower GBP. Traders note stops and active buying above the 1.44880 area and the rate rallies to highs above 1.4930 area. Tech resistance now at 1.5000 area likely to cap near term but stops are building above and the 1.5000 handle is a big psychological number. 23 year lows are very likely to hold on any break. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Rate trading on technical’s now. Spillover from EURO likely but modest.
Data due Tuesday: All times EASTERN (-5 GMT)
4:30am GBP Trade Balance
5:00am GBP CB Leading Index m/m


Resistance 3: 1.3080
Resistance 2: 1.3020/30
Resistance 1: 1.2990/1.3000
Latest New York: 1.2986
Support 1: 1.2750
Support 2: 1.2700
Support 3: 1.2680

Rate follows GBP higher and clears stops above the market but fails to trade the 1.3000 handle again today. Rate appears to be ready to close on the 1.2900 handle; holding 1.2980 area in early New York. Aggressive sellers likely to try and cap above key 1.3030 area; failure to hold 1.2900 today likely to signal a further break back to 1.2700. The dip is a buy opp but be nimble. Cross-spreaders likely pressure as crosses are unwound. Close above 1.3030 needed for further upside until then rallies likely to be sold into support around 1.2620/30 (?).Bulls are still attempting to find a bottom. 50 bar MA failed now likely to offer resistance and a close above suggests the bottom will be in. Technical levels around the 1.2920/50 area now likely to offer resistance so expect two-way action and consolidation underneath.
Data due Tuesday: All times EASTERN (-5 GMT)
10th-17th EUR German WPI m/m
2:45am EUR French Industrial Production m/m
4:00am EUR Italian Industrial Production m/m

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Analysis Provided by: - Written by Jason Alan Jankovsky

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