The USD ends the day mixed after a slow start in Asia; initial early strength after Durable Goods data hit… … the street fades into the London Fix.

The USD went nowhere after the fix and traders complained of low volumes,
thin conditions and dull ranges. After the better-than-expected Durables
data provided a solid rally the sellers came out at expected resistance and
the USD never challenged those prices again all day making for a toppy chart
formation. Model and Momentum accounts were seen in some pairs on the bid
for USD suggesting that the potential top may actually be in place across
the board. Some price action after the best levels of the day for the USD
offer compelling reasons to stay on the short side through the end of the
week. Cable advanced to the 1.9830 area overnight Asia only to be met with
selling that found close-in stops at the 1.9770 area and below for a low
print after durables at 1.9703; bids lifted the rate back over the 1.9800
handle to trade firm all day in less than two hours. A 100 point move in
both directions whipsawing both sides to finish higher on the day; not a
good sign for the bears. EURO also stopped short on support, holding the
1.5600 handle after a sharp stop-driven break for a low print at 1.5603
before sovereign names were seen on the bid. The 50 bar MA comes in as
support at the 1.5661 and although a technical sign of potential slippage;
the fact that the rate found no real stops in size on a break below the MA
suggests that there is no one willing to sell under the 1.5660 area. Now
that weak longs have been cleared, all the remains is to see if late shorts
sold EURO into the hole today. Should that be the case; expect a rally the
next 24-48 hours. USD/JPY rallied through stops and resistance for a high
print at 105.33 clearing all the weak shorts out before dropping back to
trade 104.60 area most of the afternoon. A very long selling wick on USD/JPY
today suggests that the rate is due for a retest of the near-term lows under
the 103.00 area; some desks report that selling interest at the highs was
from exporters and semi-official names. Swissy had a similar day but
finished off the highs and nowhere near the real resistance numbers the
active bears would like to see. Highs at 1.0426 were never challenged and
the rate fell back to under the 1.0390 breakdown number. A close below the
1.0390 area argues for a test of the 1.0280 area again as volumes on the
rally were light. Look for a quiet evening ahead of GDP tomorrow.

EURO/USD Daily

Resistance 3: 1.5880
Resistance 2: 1.5850
Resistance 1: 1.5810/20
Latest New York: 1.5645
Support 1: 1.5620
Support 2: 1.5600/1.5590
Support 3: 1.5550

Comments
Rate crosses the 50 bar MA with higher volume; more losses on the way but
move into the stops finds no one home; selling pressure likely not big
enough now to move below the 1.5600 area easily. Support at 1.5550 likely to
hold on further weakness. Overhead resistance appears firmer on the approach
to the 1.5800/20 area with stops said to be out of range above around the
1.5850 area. Traders note that the rate feels “heavy” to start the week and
warn of a potential overhang of stale longs; which may have been cleared on
today's dip to 1.5600. Stops under the 1.5700 area were in size overnight
and volume was good. Look for model and momentum accounts active tonight-we
need them on the offer as the break lower was negated by the bounce. Adding
to the potential is the COT data showing a flip to net long from net short
before the holiday; a washout is likely in my view and that may have been
the move lower today.

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

3:55am EUR German Unemployment Change -25K
4:00am EUR M3 Money Supply y/y 10.3%
5:00am EUR Consumer Confidence -12

USD/JPY Daily

Resistance 3: 105.80
Resistance 2: 105.50
Resistance 1: 105.20/30
Latest New York: 104.62
Support 1: 104.20/30
Support 2: 103.80
Support 3: 103.20/30

Comments
Rate powers through offers at the 104.50 area and stops drive the rate to
next resistance at the 104.80 area; fails at the highs. After US news is out
this morning, expect a rally into the 105.10/20 area to be sold; we opened
an aggressive short in that area today. Caution on the potential top is the
rate closing over the 100 bar MA today. COT data showing an increase of net
JPY longs making the upside potential for the USD a bit higher in my view;
but that was likely the pop this morning. Stops the other side of 104.50
were in size suggesting that speculators got heavily short near current
market pricing as 104.50 area is in range with the recent weekly highs. This
week's data may support near-term as the USD has had a lot of bad press the
past quarter and has managed a firm start to the year; perhaps the Yen has a
further downside correction to go before the USD bears are again out in
force.

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

7:15pm JPY Manufacturing PMI 48.6
7:30pm JPY Core CPI y/y 1.0%
7:30pm JPY Core Tokyo CPI y/y 0.9%
7:30pm JPY Overall Household Spending y/y -0.7%
7:30pm JPY Unemployment Rate 3.9%
7:50pm JPY Industrial Production m/m

Analysis by: Forexpros.com written by Jason Alan Jankovsky

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