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Forexpros.com Daily Analysis - 26/09/2008

Discussion in 'Fundamental Analysis' started by ForexAnalysis, Sep 26, 2008.

  1. ForexAnalysis

    ForexAnalysis Contributing Member

    Apr 13, 2008
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    Daily Forex Trading Analysis

    Today’s US Dollar Trading

    • USD makes lows early, then recovers
    • Volumes heavy but bids support
    • Congress goes nowhere

    Overnight Preview

    • Look for USD to whipsaw overnight
    • USD to weaken

    Looking Ahead to Friday
    All times EASTERN (-4 GMT)
    • 8:30am USD Final GDP q/q
    • 8:30am USD Final GDP Price Index q/q
    • 9:55am USD Revised UoM Consumer Sentiment
    • 9:55am USD Revised UoM Inflation Expectations

    In true Capitol Hill style congress has delayed reaching a firm agreement on the potential bailout of the US financial system; adding conditions and requirements that promise to derail reaching a solution to the cash-strapped banking system. Adding fuel to the fire is weak housing data; despite the fundamental weakness in the overall economy investors bought equities today driving the DJIA to triple-digit gains led mostly by the financials. GBP fell sharply once news broke that the bailout plan was “nearing a solution” but as was discovered later that means “we’re talking about it”. Low prints in cable at 1.8305 making a near-term top in place suggesting that the USD will whipsaw through the end of the week as all the majors sold off in heavy trade. EURO low prints 1.4559 drew stops and active selling as late long threw in the towel and new shorts pressed their advantage. Traders report volumes were heavy on the move lower suggesting that if lows hold the resulting buy-back will be huge. USD/JPY led the complex higher as stops above the 106.30 are and more above 106.60 were triggered for a high print at 107.03 before aggressive sellers capped the move. In my view the USD is simply reacting to potential solutions to the uncertainty but the fact is there will be no resolution before next week leaving the USD vulnerable to whipsaw. Traders note that smart money is not finding confidence in the US congress to reach a solution near-term and are either sidelined or looking to sell USD on rallies. USD/JPY highs were sold heavily as were Swissy and Loonie. Early lows were bought back hard on technical factors and euphoria but the advance lost steam as the market ran not a brick wall at the high prints of 1.0945 and 1.0394 respectively. Some brain-dead congressmen are trying to add “healthcare” issues to this bill and that will no doubt cement the world’s point of view that no bill will pass by Monday. In my view; it is time to get short USD and close your eyes. The next rally will be the last USD strength seen for months and aggressive traders need to be ready to sell with both hands.

    GBP/USD Daily

    Resistance 3: 1.8750
    Resistance 2: 1.8700/10
    Resistance 1: 1.8680
    Latest New York: 1.8384
    Support 1: 1.8300
    Support 2: 1.8250/60
    Support 3: 1.8200

    Rate remains two-way overnight, corrects lower in New York. Some selling pressure seen but rate is likely to press for highs on more bad news. Aggressive traders can buy the next dip but also look to lighten longs into the 1.8700 area if it comes. Equities rally but that will fail in my view. Possible sovereign interest on the rally as semi-officials seen on dips in both EURO and GBP recently. Some stops triggered along with active buying. Traders note stops mixed with offers above the market also. Major support has held for two weeks now, any weakness likely to be bought hard. Profit-taking bids continue as well. Close above the 1.8500 area for the week likely argues for another leg higher to end the month. Rate is coiling suggesting a breakout coming soon.

    Data due Friday: All times EASTERN (-4 GMT)
    Tentative GBP Nationwide HPI m/m

    EURO/USD Daily

    Resistance 3: 1.4840
    Resistance 2: 1.4800/10
    Resistance 1: 1.4770/80
    Latest New York: 1.4618
    Support 1: 1.4560
    Support 2: 1.4520/30
    Support 3: 1.4480

    Rate two-way and tracking GBP. Dips are being bought, follows GBP both way but lots of stops and active buying seen. Traders note stops building above the market. Light pressure intraday easily absorbed despite fear of pullback. Weekly high below major resistance and rate is volatile on dips. Likely support will hold at the 1.4330 area. Some upside drawn from Cable no doubt. Expect more two-way action with upside bias; traders note the rate is firm on dips so far despite the uncertainty in the market. Traders report offers in size being absorbed. Traders suggesting that the rate is continuing to trade technically. Close over the 1.4700 area to end this week will make a lot of shorts nervous next week possibly extending a short-covering rally. Expect a solid higher close for the week. If long, look to add to positions on any weakness. Likely a dip back to the 1.4300 handle will offer a solid buy opportunity. OK to lighten up on strength.

    Data due Friday: All times EASTERN (-4 GMT)
    2:00am EUR German Import Prices m/m
    All Day EUR German Prelim CPI m/m

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

    Analysis Provided by: Forexpros.com - Written by Jason Van Jankovsky

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