Forexpros.com Daily Analysis - 11/08/2008

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Overnight Asia/Europe
• USD gaps higher then fades
• Model accounts on the offer for EURO
• Volumes modest

Today’s Economic Reports
All times EASTERN (-5 GMT)
• Nothing due Monday but big week coming.

Looking Ahead
All times EASTERN (-5 GMT)
• 8:30am USD Trade Balance
• 10:00am USD IBD/TIPP Economic Optimism

Big day for the GBP and the Yen for data.

Summary
Follow-on selling of the majors opened the week for the USD as the Greenback had an early boost to start Asia. Forex traders note that volumes were modest and model accounts were selling EURO/JPY at the open. Most of the pairs had a slight gap lower to start but once the initial USD buying was done the majors started a steady climb into European trade and eventually passed their opening ranges to make highs on the day ahead of New York. Led by EURO the USD has dropped back giving up gains across the board as traders react to over-bought conditions and light economic news. EURO saw model accounts on the sell side pushing the EURO-pairs into lows in Asia; low prints for the EURO/USD at 1.4908 on lower volumes. Bids quickly showed up and rallied the rate more than a full handle for high prints in late Europe at 1.5085 before dropping back to start New York about unchanged around 1.5025 area. The rally in EURO has pulled GBP higher also for high prints at 1.9258 finding close-in stops above the 1.9180 area traders say. Despite weaker UK data out this morning the GBP continues to remain firm and opens the NY session around the 1.9215 area. USD/JPY is off the highs at 110.41 reversing in European trade for lows at 109.60 suggesting the rate is topping. Most technical studies suggest both USD/JPY and USD/CHF are in overbought territory and today’s start to the week are likely going to add fuel to the argument. Both rates had highs in early Asia before reversing. Aggressive traders can look to sell USD today or tomorrow as the rally from last week is probably done now. Weekly studies still point to a retracement and not a change in trend while the lower timeframes are pointing to an overbought condition. Look for the USD to fall back to start the week and once US data is out tomorrow to see a bit more selling.


GBP/USD Daily

Resistance 3: 1.9300/10
Resistance 2: 1.9280
Resistance 1: 1.9250/60
Latest New York: 1.9210
Support 1: 1.9100/10
Support 2: 1.9080
Support 3: 1.9050

Comments
Rate rallies back in sympathy with EURO, poor UK PPI numbers worse than expected but rate remains firm. Stops and technical buying seen from some desks, buying seen from semi-official names on Friday and possibly the higher action today signals a bottom is in. Rate on significant support near the 1.9150 area early today. Rate has likely flushed out every long now and shorts will likely take gains soon leaving the rate vulnerable to a sharp rally. Possible buying from semi-official names so watch the news. Offers above the market mixed with stops from late shorts so be ready for whipsaw the next few days. Traders expect GBP to track EURO through this week. Continue to expect a lot of cross-trading.

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

4:30am GBP CPI y/y
4:30am GBP Core CPI y/y
4:30am GBP DCLG HPI y/y
4:30am GBP RPI y/y


EUR/USD Daily

Resistance 3: 1.5220
Resistance 2: 1.5150/60
Resistance 1: 1.5100
Latest New York: 1.5013
Support 1: 1.4980
Support 2: 1.4940/50
Support 3: 1.4900/10

Comments
Rate making lows in early trade but then bounces hard, technical selling evident from model accounts traders say suggesting that the rate has finally bottomed. Gap lower has been filled making for a technical buy signal from the lows. Market is heavily short now so expect a rally. Larger names buying traders say. Likely the rate has flushed all longs. Macro accounts seen selling on the break Friday. Aggressive traders can buy this dip for a return to resistance although we were stopped out of first attempt at a long. Rate continues to track Cable and vice-versa. Now that stops are cleared a rotation higher is coming. US data this week likely to be unfriendly so be ready for whipsaw.

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

2:45am EUR French CPI m/m


Analysis Provided by: Forexpros.com written by Jason Alan Jankovsky.

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