Today’s US Dollar Trading • USD ends the week in quiet two-way trade • Majors mostly consolidateOvernight Preview
• G7 meeting this weekend, traders expect USD positive rhetoric • The Majors likely to open better on Monday
Looking Ahead
• Light economic calendar next week • Balance of Trade and TICS are the major reports
Summary The USD finishes the week better against the major pairs but down slightly from its best levels yesterday; traders note a lot of book squaring was seen as players stand aside ahead of the G7 meeting this weekend in Tokyo. Although the communiqué is most likely going to remain about the same as the last meeting it is widely expected that FOREX will be a top topic this weekend. USD positive rhetoric is likely and that may contribute to a softer USD to start next week although I think it more likely that the Majors will continue to consolidate and edge higher. During the overnight session today, against a backdrop of firming stocks, the USD did better to start but as the day wore on and after the London Fix the Majors saw their best levels. Cable remained firm all day with a high print at 1.9511 during US trade and closed in the better part of the day’s range. Traders note that carry trades were not being set in size suggesting that the GBP will have a higher correction as more crosses are unwound on follow-through selling. GBP looks to trade back above the 1.9550 area near term although traders note today’s volume was very light; it might take some time to lift the rate. EURO made highs at 1.4548 on rumors that OPEC would soon shift pricing from USD to EURO but quickly faded once the panic was through. Both pairs had inside range day’s closing higher suggesting a bit of potential short-covering to open the week next week. USD/JPY held the important 107.00 handle for all of today’s trade, low prints at 107.13. Traders note that stops continue to build on both sides of the market suggesting a massive unwind of the coiling seen the past three weeks. Selling pressure from weak US equities was countered by bids from technical support with enough volume to prevent a break lower. Rally to 107.80 area again capped by persistent offers leaving the rate trapped again between existing S/R. For the day, the USD consolidated recent gains and nothing out-of-the-ordinary was seen. Expected S/R levels continue to define near-term trade and barring any major surprises from the fundamental sources I would expect the USD to continue in sideways consolidation on light volume until release of Balance of trade numbers and TICS data next week. Expect technical trade and lighter volumes.
USD/JPY Daily
R3: 1.4620 R2: 1.4580 R1: 1.4550 Current Price: 1.4510 S1: 1.4480 S2: 1.4450 S3: 1.4410
Rate is simply consolidating; inside range day closing higher is to be expected after the drop yesterday. Close below both 50 bar and 100 bar MA suggests a potential change in sentiment may be developing; look for lower volume rallies and higher volume breaks to confirm a top continues to form. Stops said to be building above the 1.4620 area and may be out of reach near-term. ECB is standing pat on interest rates until further notice and that may underpin a bit. Look for two-way trade early next week.
USD/JPY Daily
R3: 108.50 R2: 108.10/20 R1: 107.80 Current Price: 107.37 S1: 107.10 S2: 106.80 S3: 106.60
Rate holds firm but slightly lower as Friday trade and pre-meeting trade offer little incentive for the rate to go anywhere. Traders report that volume was light and that most players content to sit it out. Stops building on both sides traders say and the potential for an explosive move is huge. Thursday’s probe under 106 found no stops home suggesting that all the orders are above the market. If clustered above the 108.10/20 area offers ahead may still create one more dip. Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)
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