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Forexpros Daily Analysis - 12/05/08

Discussion in 'Fundamental Analysis' started by ForexAnalysis, May 12, 2008.

  1. ForexAnalysis

    ForexAnalysis Contributing Member

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    Read the Daily Forex Trading Analysis

    Today’s US Dollar Trading
    • BOE and ECB leave rates on hold, as expected
    • USD reverses after starting better overnight
    • Majors hold key support (?)

    Overnight Preview
    • Look for USD to consolidate, possible book squaring ahead of US data

    Looking Ahead
    All times EASTERN (-5 GMT)
    • 8:30am USD Trade Balance -61.4B

    Summary
    The USD is sharply lower to end the Thursday US session after initially firming overnight. The absence of major news plus general sentiment RE: the weakness in the US Economy this week put a damper on the potential for the USD to rally significantly and stay there. After a follow-on break into key support the majors reversed out of the lows and actually made highs during early New York trade before settling back to general two-way action. Cable looked set to hold the 1.9600 handle but weak longs dumped positions into the London fix and the rate continued to rotate around the 1.9550 area for the rest of the day; high prints at 1.9629 and lows at 1.9500 have created a technical double-bottom. Traders look for a bout of short covering if the 1.9500 area holds on a test the next 24 hours but with the end of the week due anyway I suspect that shorts will cover ahead of the London Fix tomorrow. EURO also rallied back after a hard fall overnight; initially triggering stops on a break under the 1.5350 area. Active selling and more stops took the rate down to 1.5284 low print before rallying back to make highs on the day at 1.5442 as late shorts were forced to cover. Traders note that system accounts and model accounts were active on the sell side overnight and most likely they were whipsawed adding to the upside bias for the US session. USD/JPY fell into stops as the 104.50/60 area was unable to hold the recent advance; stops under the 104.00 handle also adding to the pressure as were lower equities. Although equities were firmer in NY today the failure to hold gains was seen as a negative for the rate. Traders also note that USD/JPY has possibly broken the recent uptrend channel; stops are said to be resting under today’s low at the 103.60 area suggesting a long-liquidation break may be in the works. Loonie weakened dramatically and the USD/CAD was higher on the day against the sentiment of the market. Traders may be watching crude and gold prices for clues to the rates near-term direction but the 1.0200 handle is still offering solid resistance; highs at 1.0180 again. On the day, the USD has likely made the highs for the week against some pairs. Look for corrective action overnight as the market prepares for the last piece of news for the week; US balance of Trade Friday morning.

    GBP/USD Daily

    Resistance 3: 1.9680
    Resistance 2: 1.9650
    Resistance 1: 1.9620/30
    Latest New York: 1.9526
    Support 1: 1.9500
    Support 2: 1.9480
    Support 3: 1.9450

    Comments
    Rate falls through 1.9650 support area and stops drive trade lower, support at 1.9500 area now in play. Bounce likely from here. Look for continuation of the recovery Friday. Look for a re-test of the 1.9600 area within 24 hours; likely ahead of the London Fix Friday. Close under the 1.9700 handle today likely washed out longs; shorts will cover before the weekend. Bounce back to trade at or near the 1.9720 area by the end of the week suggests a rally is coming. Upside remains limited in my view but ranges can be wide as evidenced by the past few days of trade. Sell rallies if not short; buying dips dangerous.
    Closes over the MA’s likely not to last so a rally over the 100 bar MA a good sell in my view.
    Some pressure from EURO remains. Cross-spreading for Yen, Swissy and EURO evident.

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


    EUR/USD Daily

    Resistance 3: 1.5500/10
    Resistance 2: 1.5480
    Resistance 1: 1.5450
    Latest New York: 1.5400
    Support 1: 1.5380
    Support 2: 1.5350
    Support 3: 1.5300/10

    Comments
    Sharp follow-on break is sold by system accounts; likely a bounce is coming. Rally over the 1.5400 handle significant. Rate holds opening range on the fall-back; solid sign of no sellers left. Break under 1.5300 area on stops suggests more losses are coming; bounce likely first. Support at 1.5280 is firm near-term. Look for rotation higher next 24 hours. Rate clears close in stops again. Strong long-liquidation break is still coming; Watch for two-way volatility. Be ready to re-short quickly if a rally happens; look for a short-covering rally to stall around the 1.5550/1.5600 area again; look to re-short in that area.

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

    Analysis by: Forexpros.com written by Jason Alan Jankovsky

    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.
     
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