The USD is slightly weaker this morning after a quiet start in Asia last night; traders note that firmer equities...

... in Asia had no impact on USD/JPY
this time and most feel that the market is sidelined ahead of FOMC rate announcements on Wednesday. Desks report some early demand for USD/JPY but once the European markets opened the demand fizzled;

high prints in USD/JPY at 104.83 after a slow start. Exporters are noted to be ready on the offer
at 105.00 with stops resting above traders say. GBP had a slow start as well
but follow-through bids from Friday lifted the rate into early stops at the
1.9850/60 area and a high print in Europe at 1.9913 before dropping back
when selling emerged in the EURO-Sterling cross; lows in Asia currently
unchallenged at 1.9780 in early NY trade. Lots of rhetoric out during
European trade and some data; traders note that the EURO seems heavy at the
highs after the release of CPI data but the rate is still firmer on the day;
high prints at 1.5694 with lows at 1.5592 making for some volatile trade
early. ECB Mersch had no comment on the report but did emphasize that the
bank is still concerned with upside risks to inflation; traders note that
the market is braced for no ECB rate cut until at least Q4 2008 but note
that dips are bought at key technical levels suggesting that at least for
the near term the EURO will remain more two way even in a correction.
Traders holding open shorts in EURO and GBP can sit tight for now as it
appears that the technical S/R levels will contain dips and rallies; stops
on the other side of those levels likely to be growing in size as the market
is looking for a decisive move by the Fed with more rate cuts to come; if
that is not the impression the markets get on Wednesday then the USD may
rally hard against the European currencies. Other major pairs remain
range-bound and technical in nature this morning; USD/CAD has had a volatile
morning so far and buying dips seem to be the favored move to start the
week. Look for the Greenback to consolidate today and into tomorrow; it's a
light calendar until then. Aggressive traders can trade from both sides as
the USD is likely to cover a lot of the same ground twice.

GBP/USD

Resistance 3: 1.9980/90
Resistance 2: 1.9950/60
Resistance 1: 1.9910/20
Latest New York: 1.9883
Support 1: 1.9750
Support 2: 1.9690/1.9700
Support 3: 1.9650

Comments
Rate bounces nicely on lighter volume, should be a "dead cat bounce" Closing
under the 1.9800 the next 24 hours likely set the stage for a return to
lower prices early in the week.

Upside is limited in my view but ranges can be wide as evidenced by the past
72 hours of trade. Sell rallies if not short; buying dips dangerous in my
view.

Drop to under the MA's very important in my view. Long selling wick makes
sell side attractive for further losses. Need down bars with higher volume
to confirm.



EURO/USD Daily

Resistance 3: 1.5750
Resistance 2: 1.5720/1.5730
Resistance 1: 1.5690/1.5700
Latest New York: 1.5633
Support 1: 1.5590/1.5600
Support 2: 1.5550
Support 3: 1.5520


Comments

Market has failed at 1.6000 area resistance with confidence now, be patient
on the potential break.
Overhead resistance is heavy above the 1.5750 area; traders say offers
extend into the 1.5800/30 area with stops above.
Two-way trade at resistance to start on Monday suggests a deeper pullback is
in the works.
Strong long-liquidation break is still coming; look for a test of the lows
again within 24 hours. Watch for two-way volatility. Be ready to add quickly
if a rally happens; likely to fail quickly.

Today a close back under the 1.5600 handle very important; look for a test
of the 1.5550 area early this week, offers likely on a rally to 1.5700 area.


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