U.S. Dollar Setting up for a Decline Into End of Month

Currencies / US Dollar Apr 23, 2009 - 03:06 AM GMT

Best Financial Markets Analysis Article The USD suffered a violent whipsaw today first rising to highs during early New York trade before reversing to make lows against some pairs and end mixed. Rising to highs against the GBP, low prints were hit early as stops and aggressive selling dropped the rate to a low print 0f 1.4395 before short-covering and aggressive buying lifted the pair back to the 1.4500 handle to hold around 1.4510/20 area most of the day.

Traders note middle-eastern names on the buy side around the 1.4420 area and slightly lower as the 50 day MA offered support helping the rate to reverse during the London fix. Traders note cross-spreaders also active on the sell side of the Sterling spreads helping to push the rate lower but most caught wrong-footed as the rate rallied.

Helping to lift the GBP higher, EURO rallied after lows at 1.2885 overnight were bought lifting the rate to hold around the 1.2530 area; shortly before the London fix the rate exploded to the upside triggering stops above the 1.3000 handle for a high print at 1.3038 before two-ay action dropped the rate back under the 1.3000 handle. Eventually recovering to hold the 1.3020 area in late trade the EURO holds above key S/R into the close.

USD/CHF remained under pressure eventually making new lows on the day at 1.1599 before lifting to the 1.1680 area in two-way action; the rate fails into the end of the day to trade the 1.1620/30 area in light trade making for a near-term technical top with a weaker close.

USD/JPY found support on a dip to the 97.50 area with a low print at 97.56 before regaining the 98.00 handle in late trade; high prints overnight at 98.75 remained unchallenged but the rate holds 98.10/20 area into the end of day.

USD/CAD rallied to a high print while the Greenback moved higher elsewhere making a top at 1.2479 before reversing to make lows at 1.2326; the rate ends the day around the 1.2380 area after briefly whipsawing back to the 1.3400 handle but the rate couldn’t hold the gains. In my view, the USD is continuing to set-up a top as has been the case the last few weeks; most traders note that momentum traders tried to buy USD as the GBP wilted this morning but were turned back across the board despite the rally mid day in most pairs.

The Greenback is unable to hold gains heading into the end of week suggesting the possibility that the majors have found their bottom for this week and possibly for the month setting up a further decline to end the month. Look for the USD to remain two-way overnight as traders await the results of the G-7 meeting this weekend resulting in quiet trade ahead; key S/R levels are now in play and if the majors can hold gains a short-covering rally is likely near-term.

GBP/USD Daily

Resistance 3: 1.4820
Resistance 2: 1.4780
Resistance 1: 1.4720/30
Latest New York: 1.4620
Support 1: 1.4500/10
Support 2: 1.4440/50
Support 3: 1.4400

Comments
Rate gets slammed as stops and active selling from cross-spreaders break the rate under the 1.4440 support zone; retraces earlier gains to probe for stops in range. Rate likely to have stops building in-range to the upside now that downside stops cleared in a rush. Rate recovers ahead of the fix and regains the 1.4500 handle for most of the day but remains whippy. Initial test of the psychological 1.5000 area now complete with the pullback likely about over as well and the rate is ready to try for the 1.5000 handle again.

Rate likely to find buyers on any dip to the 1.4500 area as this was the breakout area. Rate tests the 50 day MA before recovering back to hold near the 100 day MA; aggressive traders can look to buy dips. The shorts have lost control of the market above the 1.4440 area now; traders report stops in-range adding for two-way action. Test of further lows likely to encourage a round of short-covering.
Data due Thursday: All times EASTERN (-5 GMT)
6:00am GBP CBI Industrial Order Expectations

EURO/USD Daily

Resistance 3: 1.3120
Resistance 2: 1.3080
Resistance 1: 1.3020/30
Latest New York: 1.3005
Support 1: 1.2880
Support 2: 1.2850
Support 3: 1.2820

Comments
Rate makes two-pip monthly low before bouncing back to the 1.2950 area, rallies again ahead of fix to clear stops said to be resting around the 1.3020/30 area but holds. Rate reaches to tech support around 1.2880 but traders say conditions are still on the thin side. Rate has two-way action into the lows suggesting short-term traders and profit-taking by the shorts.

Support at or around the 50 day MA now being tested; the 50 day MA is next level needed to hold for the bulls to feel comfortable this week. Need a rally back over within 72 hours for the drop to be considered a correction and not a breakout. Rate likely has stops building in both directions; overhead resistance likely drops to the 1.3080 area; Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view. Stops above the 1.3030 area likely today.

Data due Thursday: All times EASTERN (-5 GMT)
3:00am EUR French Flash Manufacturing PMI
3:30am EUR German Flash Manufacturing PMI
4:00am EUR Current Account
4:00am EUR Flash Manufacturing PMI
4:00am EUR Flash Services PMI
5:00am EUR Industrial New Orders m/m
9:00am EUR Belgium NBB Business Climate

Analysis by: http://www.Forexpros.com - Written by Jason Alan Jankovsky

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