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Forexpros.com Daily Analysis - 06/08/2008

Discussion in 'Fundamental Analysis' started by ForexAnalysis, Aug 6, 2008.

  1. ForexAnalysis

    ForexAnalysis Contributing Member

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    Forex Daily Analysis

    Today’s US Dollar Trading
    • USD rallies to highs
    • FOMC is seen as disappointing
    • No major reaction to the news

    Overnight Preview
    • USD to fall back on book squaring
    • Volumes to remain light

    Looking Ahead
    All times EASTERN (-5 GMT)
    • 10:35am USD Crude Oil Inventories
    Another light day for data across the board.

    Forex Trading Summary
    After a stop-driven rally overnight that drove the USD higher to start today’s trading the USD has consolidated gains in less-than-active trade to finish the day. This morning’s ISM services data was a bit better than expected and the USD remained firm after seeing early signs of running out of upside momentum. Traders report large names on the bid for GBP and EURO on today’s dips and they were rumored to be in on the buy side after today’s main news. As expected, the US Fed’s FOMC voted to hold rates steady at 2.0% again this month and released an “as expected” statement that basically caused a small wiggle in the USD for a moment or two. Although USD/JPY rallied on the news making a new high at 108.42 the rumored large stops must be a bit farther away as the rate fell back shortly thereafter to trade the low 108.00 handle; traders report that the offers that have turned the rate back the past several sessions remain in size and the bulls are likely getting tired of waiting as they have just seen their best effort to-date rejected so far. USD/CHF also saw a rally but did not make a new high on the day and remained in the same range as it was before the report. Forex trader’s note that volumes in all pairs were only on the lighter side and that may be the reversal signal for the Swissy as a low volume rally for the second time this week failed to find large stops above the market. GBP found a new low post-London fix but has whipsawed sellers on the news; aggressive traders can buy Cable anytime now as the sell-off looks to be reaching at this point. Semi-official names reported on the bid during the day as well. Helping to hold the GBP higher was EURO as both rates continued to track each other. Cross-spreading overnight was not significant enough to push the EURO past the recent overnight low suggesting that the rate is about ready to rotate higher; aggressive traders can look to buy the rate under the 1.5500 handle. In my view, the USD has exhausted its upward momentum at this point. FOMC was more than enough to attempt another leg higher by the USD and the failure to extend gains suggests the USD has made the highs for the week. Look for the USD to leg lower the next 24 hours.


    GBP/USD Daily

    Resistance 3: 1.9700
    Resistance 2: 1.9680
    Resistance 1: 1.9630
    Latest New York: 1.9565
    Support 1: 1.9520
    Support 2: 1.9480
    Support 3: 1.9450

    Comments
    Rate follows EURO lower and hits large stops; good buying seen from large names at 1.9550 area. Fails to hold early gains on very light volumes. Rate has likely flushed out weak early longs and shorts will likely take gains soon leaving the rate vulnerable to a rally. Close to the buy zone in my view. Possible buying from semi-official names so watch the news. Offers above the market mixed with stops from late shorts so be ready for whipsaw the next few days. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading.

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

    5:30am GBP BRC Shop Price Index y/y


    EUR/USD Daily

    Resistance 3: 1.5680
    Resistance 2: 1.5620
    Resistance 1: 1.5580
    Latest New York: 1.5462
    Support 1: 1.5450
    Support 2: 1.5400/10
    Support 3: 1.5380

    Comments
    Rate falls into next support level on stops and active sales; reserve manager and official names seen on the dip into the 1.5490 area traders say. Likely the rate has flushed early longs. Macro accounts seen selling on the break suggesting the rate will find a bottom soon around current levels. Rate feels like it wants to rally off these lows. Aggressive traders can buy this dip for a return to resistance although we were stopped out of first attempt at a long. Rate continues to track Cable and vice-versa. Now that stops are cleared a rotation higher is coming.

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

    6:00am EUR German Factory Orders m/m


    Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky.

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