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Forexpros.com Daily Analysis - 17/10/2008

Discussion in 'Fundamental Analysis' started by ForexAnalysis, Oct 17, 2008.

  1. ForexAnalysis

    ForexAnalysis Contributing Member

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    Daily Forex Trading Analysis

    Today’s US Dollar Trading

    • Poor US data fails to inspire a sell-off
    • Majors tracking equities
    • Traders continue to focus on financial crisis and not fundamentals


    Overnight Preview

    • Look for more two-way action
    • USD to consolidate again tomorrow


    Summary
    It was another volatile day in the US markets today, equities falling off again then whipsawing higher, oil dropping to yearly lows, USD whipping around as well. US data was weak as expected today; some analysts called it “hopelessly bearish” for the US economy. All news today was considered bad for the long-term health of the US economy but sharply lower Philly Fed was probably the most devastating. Apparently the manufacturing sector believes we are in a recession already and won’t be out of it for quite some time; Philly Fed out today at -37.5 vs. +3.8 last month. Although all data was weak today the USD continued to focus on the financial crisis and equities; the USD rising or falling with equities today for the most part. Traders note that the Greenback is remaining two-way in late New York trade with little pushing trade at all; thin conditions are exaggerating minor moves and most of the majors are ignoring fundamentals anyway. GBP rallied in late trade while EURO held back; high prints for Cable at 1.7354 with the rate above the 1.7330 area into the close. EURO was unable to extend early strength; high prints at 1.3539 went unchallenged after the London fix and the rate pressed for lows later in the day. Low prints at 1.3345 went unchallenged but the rate did
    forex trade to the low 1.3400 handle in US trade making for whippy conditions again today. USD/JPY had low prints overnight at 99.24 before rallying and whipsawed traders today as equities rallied then fell then rallied suggesting that there isn’t a lot of rational activity in the Greenback lately. In my view, the USD is still trapped in existing ranges and that it will take something more than bad economic news to shake things loose. I think it is apparent that the USD is under duress with bad economic conditions and the longer the USD hold these artificial gains the faster the drop will be when it comes. Look for more two-way action and the majors to track equities. Don’t expect some pairs to make a lot of sense the next day or two; apparently some action is being driven by panic and fear as the financial crisis continues to drag on.



    GBP/USD Daily

    Resistance 3: 1.7720
    Resistance 2: 1.7680
    Resistance 1: 1.7630/40
    Latest New York: 1.7340
    Support 1: 1.7130
    Support 2: 1.7100
    Support 3: 1.7020/30


    Comments
    Just a bit early on the buy for GBP; rate falls then recovers and posts highs. Today’s action very whippy and two-way. Pullback to support around the 1.7380 area challenged and stops found under for lows. Rate at buy zone now but range appears wider. Cross-spreading liquidation likely supporting the rate but two-way action adding to volatility. New Lows last week around the 1.6800 area likely to hold now. Traders note quality bids on the dip suggesting a bottom is in here somewhere. A solid close over the 1.7300 handle has likely helped the longs; expect more buying on dips. Aggressive traders can look to the buy side again on any dip the next day or so. Follow-on selling likely from technical’s but spillover strength from EURO likely to be better to end the week. Look for a recovery back to the 1.8000 handle near term; two-way action likely to continue. Confirmed sovereign interest on the dip last night as semi-officials seen on dips in both EURO and GBP recently. Traders report cross-spreading for Sterling crosses likely driving the rate near-term.
    Data due Friday: All times EASTERN (-4 GMT)
    NONE


    EURO/USD Daily

    Resistance 3: 1.3880
    Resistance 2: 1.3820
    Resistance 1: 1.3780
    Latest New York: 1.3453
    Support 1: 1.3350
    Support 2: 1.3300/10
    Support 3: 1.3280


    Comments
    Rate dips to support a bit farther down than expected but rate attracts two-way action over the 1.3500 handle to open New York; stopped out of buy early. OK to look to the buy side again the next day or so. Dip from highs holds technical support and should attract a rotation higher. Pullback under the 1.3500 handle likely to attract bids as further dip was bought aggressively last time. Rate is an absolute screaming buy in my view. Aggressive traders can buy anytime under the 1.3900 handle in my view but be ready for continued two-way action ahead of a rally. Oil two-way spills over into pricing but rate firm despite lower oil. Traders note stops building above the market along with offers. Expect more two-way action with upside bias; traders note the rate is finding profit-taking bids on dips so far despite the uncertainty in the market. Traders suggesting that the rate is continuing to trade technically. Traders note official names on the offer overnight this time.
    Data due Friday: All times EASTERN (-4 GMT)
    5:00am EUR Trade Balance

    Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

    nalysis Provided by: Forexpros.com - Written by Jason Alan Jankovsky

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