Daily Forex Trading analysis - 16/06/08
Overnight Asia/Europe
• G-8 no mention of FOREX, threatens oil traders
• EU inflation revised higher
• USD on the defense to start the week
Today’s Economic Reports
All times EASTERN (-5 GMT)
• 8:30am USD Empire State Business Conditions Index
• 9:00am USD TIC Net Long-Term Transactions
• 1:00pm USD Pending Home Sales m/m
TICS and Pending Home Sales the big news on the day
Looking Ahead to Tuesday
All times EASTERN (-5 GMT)
• 8:30am USD Housing Starts
• 8:30am USD PPI m/m
• 8:30am USD Building Permits
• 8:30am USD Core PPI m/m
• 8:30am USD Current Account
• 9:15am USD Capacity Utilization Rate
Summary
The USD is on the defensive this morning after opening firmer to mixed in Asia overnight. The G-8 Communiqué was seen as USD bearish as no mention of currencies was made only a warning to oil speculators creating a risk to global inflation. In my view, the G-8 is missing the point—if you want to curb global inflation risks than force CHINA TO FLOAT THE YUAN; don’t punish those smart enough to take advantage of supply/demand inequalities. In any case, the USD initially fell on the remarks and remained two-way until early European trade. Upwardly revised EU HICP inflation numbers provided a brief pop high in EURO printing a 1.5475 high before dropping back a bit to open New York at 1.5460 area;
Forex traders note the rate saw Russian selling around the 1.5430/40 are with stops above the 1.5450 area providing the lift into the highs. Technical trade likely ahead of additional offers in the 1.5500 area but the upside bias is there to start the week. GBP followed EURO higher making a move for stops above the 1.9580 and 1.9600 areas for high prints at 1.9649 making Cable the biggest mover on the board to start eh week. Cross-spreaders again in focus traders say as EURO/GBP spreaders take gains off the table from last week. Volumes have been modest but the GBP appears to be holding the 2008 lows again and a rotation into resistance is now likely but traders expect two-way action to continue on the way. USD/JPY continues to defy logic as the rate trades beyond the 200-day MA this morning; high prints at 108.59 a new high for the weekly charts and upside is said to be layered with offers all the way to the 2008 highs at 110.20/30 area; traders note exporters again on the offer into the highs. A close beyond the 200 bar MA for this pair likely to draw a huge amount of buying so be ready to sell into any rally near-term. In my view, the fundamentals don’t support a higher USD anyway despite the rhetoric from Paulson, Bush and Bernanke; rallies are selling opportunities. USD/CHF has stalled into the 1.0500 handle again; high prints at 1.0523 were sold and the rate is a full handle lower at 1.0425 to start New York. The strong sell signals on the daily charts are still active and aggressive traders can sell the rate anytime in my view. Today’s data is not expected to be market moving but might add a bit to the USD heaviness seen to start the week; look for the USD to whipsaw today but close lower across the board.
EUR/USD Daily
Resistance 3: 1.5550
Resistance 2: 1.5500/10
Resistance 1: 1.5480
Latest New York: 1.5463
Support 1: 1.5350
Support 2: 1.5300/10
Support 3: 1.5280
Comments
Another strong buy signal this morning suggests the rate will bottom; expect higher action all week as late shorts get squeezed. Looking to ADD to open longs if you took some on Friday—if not; looking to open a long on any weakness. Rate finds support as more rumors of Swiss private bank bids at current levels; should rate put in a long tail today a buy might be on the table for Tuesday. Stops and bids noted at the 1.5420 area in size; more said to be resting at the 1.5500. Overhead resistance appears firm at 1.5550 now that the 1.5340 area of option defense fell.
Data due Tuesday: All times EASTERN (-5 GMT)
4:00am EUR Italian Trade Balance
5:00am EUR German ZEW Economic Sentiment
5:00am EUR ZEW Economic Sentiment
5:00am EUR Trade Balance
USD/CHF Daily
Resistance 3: 1.0620
Resistance 2: 1.0580
Resistance 1: 1.0550/60
Latest New York: 1.0430
Support 1: 1.0420
Support 2: 1.0400
Support 3: 1.0380
Comments
Rate likely to draw additional selling pressure on a drop back under the 100 bar MA today; look for sell signals the past three sessions to hold. Look for a short early this week; aggressive traders who sold USD/CHF on the close Friday can look to add soon. Overhead resistance at the 1.0600 handle but rate may be getting boost from other USD strength in other pairs. Rate continues to rotate up to and fail at the 100 bar MA area; the 1.0480 area looks to be poised to offer resistance again today but a sell off to end the day is needed. Buyers appear to be technical traders and expect some momentum accounts on the bid soon. No doubt some bids are profit-taking from the shorts but that won’t last in my view. Any rally likely to attract selling again so be ready for a short next week. In my view, the rate needs to be sold on any strength.
Data due Tuesday: All times EASTERN (-5 GMT)
3:15am CHF Industrial Production q/q
Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky
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