USD two-way again, GBP rallies back, Fed cuts. As expected the FOMC cut interest rates 25 BP today and changed...

... the wording
of the statement suggesting that the Fed is taking a more neutral course in the coming months.

Analysts are debating that the Fed would like to see the
effect of both the new liquidity windows and the government rebate-stimulus
package before weighing in on further rate cuts. The Fed made clear that it
is still considering the inflation pressures seen recently and the bottom
line to the rate cut is a "wait and see" attitude. In response the USD
whipsawed trader's on the news; initially rising against some pairs and then
getting slammed later. Traders note that the rally in GBP as well as EURO
are "knee jerk" responses to trade volatility and don't expect a serious
change in trend; most agree the USD "squeezed" weak longs initially. For the
record, the GBP rallied on news starting this morning as other US news was
not USD friendly but popped higher on stops and short-covering above the
1.9800 handle for a high print at 1.9897 before finding offers at technical
resistance around the recent developing down trend. Traders note that cable
has been exceptionally volatile the past several weeks and today was no
exception; if the rate follows suit the next 24 hours we should see a return
to the 1.9600 handle by the end of the week. EURO rallied initially on the
news for a high print at 1.5645 and looks set to continue higher but offers
in the 1.5650 area and 1.5680 area are said to be getting thicker so this
rally off the lows may be a dead-cat bounce. Look for a lack of
follow-through overnight. USD/JPY broke under the 104.00 handle in heavy
trade for a low print at the 103.68 number at last look; traders note that
the rate has had good selling from CTA types and exporters around the
104.60/80 area this morning. USD/CAD and Swissy also taking their lumps but
not nearly as aggressively as other pairs; OK to hold open shorts across the
board and let the overnight action work for us. Tomorrow is a light day for
news so expect a rotation in the USD; especially against GBP.

GBP/USD

Resistance 3: 1.9950
Resistance 2: 1.9900/10
Resistance 1: 1.9820/30
Latest New York: 1.9883
Support 1: 1.9820/30
Support 2: 1.9780
Support 3: 1.9750



Other Things to Watch/Open Trades/News

4-30-08 SELL GBP/USD 1.9820 OB Stops@ 1.9920
(Should be short from this afternoon)

Whipsaw still evident, selling into the top of the trend line and
volatility.

Comments
Rate under 1.9720 area important but rally back clears weak shorts. major
stops likely under the 1.9600 handle; likely to be challenged soon but given
conditions a bounce is coming first (which happened after FOMC)
Upside remains limited in my view but ranges can be wide as evidenced by the
past few days of trade. Sell rallies if not short; buying dips dangerous in
my view.
Drop to under the MA's very important, long selling wick makes sell side
attractive for further losses. Need down bars with higher volume to confirm.
Overnight data unfriendly with more to come, Some pressure from EURO also.
Rate attracting bids from momentum players so look for stops close-in
overnight.

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

2:00am GBP Nationwide House Prices m/m -0.5%-0.6%

EURO/USD

Resistance 3: 1.5700/10
Resistance 2: 1.5680
Resistance 1: 1.5650
Latest New York: 1.5615
Support 1: 1.5580
Support 2: 1.5540/50
Support 3: 1.5520



Other Things to Watch/Open Trades/News

4-22-08 SHORT EURO/USD 1.6000 Stops @ 1.5750
4-24-08 SHORT EURO/USD 1.5650 Stops @ 1.5750

ROLL Stops to 1.5750 on entire position; look to add to shorts again later
today.

Close under the 1.5550 area sets up a test of stops.

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
now with 1.5660 first; 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; test of the lows as expected Wednesday. Watch for two-way
volatility. Be ready to add quickly if a rally happens; rate has BIG stops
under the 1.5520 area and a break under the 50 bar MA could be swift. Rally
after FOMC is a "head fake"; look for retreat within 24 hours.

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

All Day EUR Holiday: Labour Day



USD/JPY

Resistance 3: 104.80
Resistance 2: 104.50
Resistance 1: 104.20/30
Latest New York: 104.01
Support 1: 103.50/60
Support 2: 103.20/30
Support 3: 103.00



Other Things to Watch/Open Trades/News


4-30-08 SHORT USD/JPY 104.80 Stops @ 105.80

BOJ leaves rate unchanged, lowers GDP estimate from 2.1% to 1.5% for 2008

Comments
Extra effort by the bulls cleans out stops and makes the 105.00 area in view
now; failure at 104.80 Wednesday AM set-up break after FOMC. Failure on
Tuesday sets the tone for a test of 105.00 area at some point Wednesday
(that is done now). Traders note that the market is still trading
technically and expect stops to be run in both directions near-term; expect
some volatility. Day traders may get a lot of opportunity as the rate will
likely cover a lot of the same ground twice on the hourly time frame. With
rate back under the 104.00 handle expect a bounce from the 103.20/30 area if
stops accelerate the move; look to sell that bounce the next 48 hours; which
we are in now. Rate looking for a failure by Thursday afternoon.

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

7:50pm JPY Monetary Base y/y -2.3%0.0%



USD/CHF

Resistance 3: 1.0500
Resistance 2: 1.0480
Resistance 1: 1.0450
Latest New York: 1.0355
Support 1: 1.0320/30
Support 2: 1.0300
Support 3: 1.0270/80



Other Things to Watch/Open Trades/News

4-29-08 SHORT USD/CHF 1.0380 Stops @ 1.0480

Look to add to positions on a drop under the 1.0300 handle later in the week


Comments
Rate clears stops above near-term resistance. Rate dropping back from top of
range; look for a sell-off from here but news is needed. FOMC provided the
impetus, pullback was bought after the fix on Tuesday again and the rate
tested the 104.30/40 area for the failure.
Test of the lower range now expected if rate can attract some momentum.
Expect a bounce from 1.0250 now so be nimble though as a break below there
likely to draw aggressive selling. Rate has set up to attract dip buying so
we need to see if that will continue on the next pullback. Need a failure at
1.0420 near-term to hold short in my view. No follow-through is to be
respected; look for offers to show up higher than the1.0400 handle now that
the bounce followed through higher.

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

None



USD/CAD

Resistance 3: 1.0180
Resistance 2: 1.0140/50
Resistance 1: 1.0090/1.0100
Latest New York: 1.0071
Support 1: 1.0020/30
Support 2: 1.0000
Support 3: .9970/80



Other Things to Watch/Open Trades/News

4-29-08 SHORT USD/CAD 1.0130 Stops @ 1.0230
SELL on a close under 1.0050 today

Failure to close above the 101.80 area suggests
the rate has a failed rally (top of range).

Comments
Sharp break early Monday suggests sellers trying to take control; bounce off
the
MA's expected but volumes not high. OK to hold through the close if not
stopped out as stops are out of range from last week. Close below 1.0100 now
needed to set up break into the bottom of the range in my view. Lack of
downside follow-through Friday suggests rate is "stuck". OK to day trade
from both sides if aggressive.
Rate closed under the 1.0100 area today, look for a close under 1.0040/50
area to set-up a deeper pullback later this week; stops likely under the
.9980 area in size
Nothing to do but continue to wait in my view; price is inside "no man's
land"


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

11:45am CAD BOC Governor Carney Speaks



Analysis by: Forexpros.comwritten by Jason Alan Jankovsky

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