U.S. Dollar Two Way Action Following Interest Rate Cuts

By: ForexPros

The USD is lower to start New York after a quiet steady open in Asia overnight; traders note trading was subdued in early trade but appetite for the Yen crosses finally began to push the USD lower. Technical trade was the rule as no real unexpected news was released . Falling back from Friday’s highs the Greenback failed at several key technical support levels across all major pairs to start the week on the defensive. Equities were higher across the board with all major bourses in the black by several percent helping to support their respective currencies.

The DJIA is called higher this morning suggesting that the USD will remain under pressure into the London fix.

GBP scored an overnight high at 1.5051 at tech resistance; falling back more than a full handle to trade 1.4910 above previous resistance at 1.4850. Traders report some light stops but lower volumes.

EURO high print at 1.2917 before profit-taking by short-term longs pushed the rate back to the 1.2850 area but the rate has since stabilized around 1.2770/80 area suggesting the EURO has solid support at the 1.2750 area of previous resistance.

USD/JPY rallied as equities rose overnight but still held resistance around the 94.00 area; high prints in the rate at 93.92. Traders report solid buyers from the lows at 92.56 suggesting that the rate may be attempting a technical correction but most agree more losses are coming likely into the low 90.00 area.

USD/CHF backed off the Friday highs as well as light profit-taking stalled the rate at a high print at 1.2211; traders note volumes lighter and focus remains on equities. Technical levels suggest a close above the 1.2180 area likely to attempt a new high but I don’t think that is likely as the volumes have been dropping off into the highs twice now making for a weak top in my view. Aggressive traders could short the rate on any strength back to the 1.2180 area if not short from last week in that area. Low prints in USD/CHF at 1.2080 making for two-way trade.

USD/CAD also under pressure as expected; no real news from the government over the weekend but higher crude may be lending a hand some traders say. High prints in USD/CAD 1.2755 with lows at 1.2442; currently under pressure in New York at 1.2510/20 area.

In my view, the USD is having a simple technical day; no real action beyond current levels is in play at this point. Today’s news is out and it was minor in nature and the only thing on the calendar today is speakers. Traders will likely take their cue from equities today so if stocks rally watch to see where USD/JPY stalls; anything under the 94.00 handle the rate may be bottoming for a short-squeeze. Look for the USD to continue two-way overnight.

GBP/USD Daily

Resistance 3: 1.5200 , Resistance 2: 1.5100/10 , Resistance 1: 1.5050. Latest New York: 1.4853,

Support 1: 1.4550 ,Support 2: 1.4460/70, Support 3: 1.4420

Comments

Rate rallies to start the week, some light stops reported. More upside now due on Tuesday as the market is shrugging off bearish news. Aggressive traders can look to ADD to open longs anytime looking for a push through and a close back above 1.5000. Some spillover from EURO likely. Analysts suggest 100 BP rate cut probably already fully factored in; good bids reported but supply seen from semi-official names. Traders note solid two-way action with stops cleared across several levels in both directions. Sellers hold control above 1.5100 area so far; OK to buy if flat on a dip. Profit-taking likely to result in a squeeze on the further strength. Technical trade overnight again. Traders note liquidity is only moderate and still on the lower side.

Data due Tuesday: All times EASTERN (-5 GMT)

4:30am GBP Manufacturing Production m/m

4:30am GBP Trade Balance

4:30am GBP DCLG HPI y/y

4:30am GBP Industrial Production m/m

Tentative GBP MPC Member Sentance Speaks

7:01pm GBP NIESR GDP Estimate

EURO/USD Daily

Resistance 3: 1.3000/10 , Resistance 2: 1.2950 , Resistance 1: 1.2920, Latest New York: 1.2848

Support 1: 1.2580 ,Support 2: 1.2550, Support 3: 1.2480

Comments

Rate continues to hold at support, possible sovereign interest on the bid. Spillover from GBP helps hold the rate above support at 1.2750 area. Buyers are willing on dips. Possible reversal now in play but the rate needs to firm above the 1.2850 area in my view. Bids are building under the 1.2600 area as expected; sell-off likely to be bought hard now. OK to try the long side again on a dip if not already long.

Aggressive traders can ADD to open longs again under the 1.2750 area near-term. Traders note stops building above the market around the 1.2950 area in size likely to help create some two-way action. Support also from cross-spreaders as they unwind Yen. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. Traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market.

Data due Tuesday: All times EASTERN (-5 GMT)

2:00am EUR German Trade Balance

2:45am EUR French Gov Budget Balance

2:45am EUR French Trade Balance

5:00am EUR German ZEW Economic Sentiment

5:00am EUR ZEW Economic Sentiment

Join us for the Morning FOREX Briefing daily at 7:45 AM Central/Chicago time (GMT -5)

Analysis by: http://www.Forexpros.com - Written by Jason Alan Jankovsky

Forexpros offers the most definitive Forex portal on the web. It contains industry leading market analysis, up-to-the minute news and advanced trading
tools which provides brokers, traders and everyone involved in the financial market with an all-round guide to Forex.

Copyright © 2008 by ForexPros.com All rights reserved.

Disclaimer: Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.