The USD is stronger across the board after a weak start in Asia overnight; volumes have been light all day...

... traders say and technical trade has been the rule.


Staying mostly within established ranges the Greenback failed to
extend strength with any conviction but rather remained within established
recent ranges and covered a lot of the same ground twice. Making new lows
after the London fix, EURO remained on the defense all day and fell to a low
print at 1.5634 before seeing short-covering from weak shorts. Highs in the
rate were an unimpressive 1.5740 making the EURO stuck near-term inside
recent ranges. GBP fared a bit better for the bears with low prints at
1.9664 clearing stops under the 1.9700 area again; traders note that
cross-spreading for the Yen pairs kept the two-way action alive in Europe as
whipsaw in most pairs forced out weak hands overnight. Both EURO and GBP
again suffered from weak equities but shrugged off poor US housing data this
morning. Dropping a larger than expected 4.7% Pending home sales created a
brief flurry of activity but once that was out of the way the EURO and GBP
settled into a slow grind lower until minor stops were hit and shorts
covered into the break. Technical trade is expected again overnight and
tomorrow leaving the majors vulnerable to another dip lower. USD/JPY stalled
on the approach to the 107.50 area; high prints with light stops at 107.55
but traders say volumes on the move were almost nil. Option defense and
offers are layered ahead of the 107.70/80 area suggesting that the top is
in. Asian sovereigns were seen on the offer as well making the USD
vulnerable at this level. USD/CHF benefited from cross-trade and general USD
bids to score a high print at 1.0343 making for a double top on the daily
charts. Again, volumes were light. In my view, a low volume rally into a
significant technical area suggests that the majors will reverse again
overnight; the question is when will the majors make a sharp move instead of
range-trade? In my view, it would be a good idea for traders to consider
shorting the USD on any additional strength the next 24 hours. US news due
is not market moving in my view and the majors are trading technical. Look
for a correction lower tomorrow in the greenback.



GBP/USD Daily

Resistance 3: 1.9900

Resistance 2: 1.9850

Resistance 1: 1.9820/30

Latest New York: 1.9694

Support 1: 1.9650/60

Support 2: 1.9600

Support 3: 1.9550



Comments

Rate remains inside buying wick from yesterday; following EURO lower. Strong
sell signal active and aggressive traders can sell the rate on any strength.
Bids around the 1.9660 area from “large names” cushioning the break; rally
clears a lot of weak shorts as the week starts. Traders expect GBP to track
EURO this week. Traders now expect a top to form as the rate had thinner
volume on the rally into the reported option defense last week and
overnight. Rate fails at high prints near previous resistance so a
correction is still developing. Spillover weakness/strength from EURO still
likely all week this week. Continue to expect a lot of cross-trading. G-8
data may create some whipsaw again.



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



4:30am GBP Trade Balance

5:30am GBP BRC Shop Price Index y/y





EURO/USD Daily

Resistance 3: 1.5800/10

Resistance 2: 1.5780

Resistance 1: 1.5750/60

Latest New York: 1.5654

Support 1: 1.5630

Support 2: 1.5600/10

Support 3: 1.5580



Comments

Rate is failing to attract bids; offers increase on whipsaw after US data.
Major support at the 1.5580 area and slightly below. Stops elected under the
1.5700 area but option defense reported at 1.5650 area. Highs were sold
aggressively by Asian sovereigns again today traders say and it looks like
they will attempt it again on additional strength. Stops noted under the
previous lows layered under 1.5600 to 1.5550 traders say. Should cable
break—EURO could go with it. The 50 bar MA likely to offer support should
the rate fall back; bids will likely be in the 1.5580 area or so on any
meaningful correction. Exponential reversal still valid. Looking for a sell
on this strength.



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



2:00am EUR German Trade Balance

2:45am EUR French Trade Balance

3:00am EUR ECB President Trichet Speaks





Many Thanks



Lauren Stoney


www.forexpros.com