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Forexpros.com Daily Analysis - 07/11/2008

Discussion in 'Fundamental Analysis' started by ForexAnalysis, Nov 7, 2008.

  1. ForexAnalysis

    ForexAnalysis Contributing Member

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    Forex Analysis - Daily

    Overnight Asia/Europe

    • USD follows through as expected but fails at highs
    • Yen crosses drive early trade in Asia
    • Markets expect a poor NFP number


    Today’s Economic Reports
    All times EASTERN (-5 GMT)
    • 8:30am USD Non-Farm Employment Change
    • 8:30am USD Unemployment Rate
    • 8:30am USD Average Hourly Earnings m/m
    • 10:00am USD Pending Home Sales m/m
    • 10:00am USD Wholesale Inventories m/m
    • 3:00pm USD Consumer Credit m/m


    Looking Ahead to Monday
    All times EASTERN (-5 GMT)
    • Tentative USD Assist Treasury Sec Kashkari Speaks
    Light day for US news—expect two-way action.


    Summary
    Yen crosses continued to pressure the majors overnight as traders saw follow-on buying of USD into early Asia. Taking the cue from EURO/JPY, GBP/JPY sold off after weaker equities started the day from yesterday’s pressure on Wall Street. The Nikkei 225 sold off to the 8260 area before staging a late rally to cut losses in half; the DJIA is called higher this morning taking some pressure off the crosses and allowing the majors to trade higher into European trade. Mostly mid-range to start New York, traders note sovereign demand in both EURO and Cable coming on under the New York lows from Thursday lifting the pairs into light stops as the majors went through the opening range. Traders note follow-on selling of Cable from the surprise rate cut by the BOE was muted suggesting the news is fully factored in; low prints at 1.5533 were not challenged after the rally and the high prints in late Europe at 1.5827 leaves a respectable range for both sides to deal with during the New York session today. US news is not expected to be USD friendly and some of the lift overnight may have been book-squaring ahead of the news. The same story was seen in EURO with the rate making lows at 1.2653 just shy of stops reported at 1.3640 area; traders note that volumes were modest but still off regular levels. High prints in the rate above the 1.2851 also giving the bulls something to work with. Aggressive traders can buy the next dip under the 1.2700 handle if we get volatility around the news today. USD/JPY continued to trade with a heavy tone despite recent USD strength from the crosses suggesting that the fundamentals may be pressuring the rate as expected. High prints at 9783 were again in range with recent highs but a new weekly low at 96.74 suggests downside pressure continues to keep the rate on the defense. USD/CHF failed to inspire new highs over the 1.1800 handle and traders report offers are heavy over the 1.1780 area suggesting the bears are still taking control of the rate; high prints at 1.1806 just barely over the Thursday highs but the rate reversed into lows at 1.1693 making for a technical hook reversal for the second time this week. In my view, the USD is poised for a retreat after NFP early this morning; bad news for the Greenback is clearly gaining more focus by traders and despite a historical tendency to rally after a new president takes office the euphoria is significantly lacking. Lower equities after the news is likely to add weight to the USD as well so look for a loss on Wall Street today. The weekend sees the G-20 meeting but don’t expect anything significant to be announced; the CB’s and the governments have done what they can to date to mitigate the financial crisis so look for more two-way action within existing ranges on Monday.


    GBP/USD Daily

    Resistance 3: 1.6320/30
    Resistance 2: 1.6250
    Resistance 1: 1.6100/10
    Latest New York: 1.5785
    Support 1: 1.5520/30
    Support 2: 1.5500
    Support 3: 1.5450


    Comments
    Rates finds support around potential rising wedge trend line and rallies past opening range; Yen crosses provide early pressure. BOE rate cut pressures GBP also on follow-through selling but is met with sovereign bids traders say. Sellers above likely older shorts adding to positions. Drop in price likely due to players adding to positions on failure to hold gains; light stops reported on overnight rally suggesting shorts are covering. Traders note liquidity is better than last week but still low. Aggressive traders can look to buy the next dip. Expect more whippy action. Two-way action likely to continue. Confirmed sovereign interest on the dip overnight in both EURO and GBP; lately Asian names. Look for a test of the 1.6000 handle today or Monday.
    Data due Monday: All times EASTERN (-5 GMT)
    4:30am GBP PPI Input m/m
    4:30am GBP PPI Output m/m
    7:01pm GBP BRC Retail Sales Monitor y/y
    7:01pm GBP RICS House Price Balance


    EURO/USD Daily

    Resistance 3: 1.3200/10
    Resistance 2: 1.3150
    Resistance 1: 1.3030
    Latest New York: 1.2784
    Support 1: 1.2640/50
    Support 2: 1.2580
    Support 3: 1.2520/30

    Comments
    Rate falls to support and holds as knee-jerk reaction to rate cuts is bought. Traders note large stops at the 1.2770 area cleared yesterday with lows holding above reported stops at 1.2640 area. Traders report Asian sovereigns buying EURO after Tokyo fix. Russians buying EURO around the 1.2860 area earlier this week traders say. Bids on dips from profit-taking shorts some desks report. Semi-official names on the offer near the highs with stops reported building in range over the Thursday highs suggesting a potential late rally on Friday. Rate possibly getting spillover effect from GBP. Support also from cross-spreaders as they unwind Yen. Official interest noted traders say. Rate is an absolute screaming buy in my view—I can’t see further weakness being ignored by the buyers. If Oil rallies likely will take EURO with it. Expect more two-way action with upside bias.
    Data due Monday: All times EASTERN (-5 GMT)
    2:45am EUR French Industrial Production m/m
    4:00am EUR Italian Industrial Production m/m
    4:30am EUR Sentix Investor Confidence
    10:30am EUR ECB President Trichet Speaks

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