Despite a mixed opening and solid two-way trade, none of the majors were able to extend gains against the USD… … today in super-light trading.

Cable scored a modest new high from overnight action, as did Yen, but all the
major pairs continue inside previous support or resistance with modest
interest on both sides remaining after the first day of trading for the
week. GBP held gains made in New York reversing off the lows seen in late
Europe but still not attracting large size. Most of the action was
considered drifting trade with little impetus behind it suggesting the GBP
was drifting higher from lack of selling rather than outright buying.
Trader's note that “absolutely nothing” was going on after the London fix.
EURO remained stuck inside a very tight 30 point range after the fix which
saw some EURO selling but not enough to break the rate back convincingly
under the 1.5700 handle. Traders complained of very light volume again as
was the case in all the pairs. USD/JPY fell to a new daily low at the 107.33
figure but saw some solid bids emerge to lift the rate off the lows; high
prints overnight at a new monthly high of 108.08 remained unchallenged in NY
trade and traders expect another test to draw out the offers again tonight.
For the most part the USD was the victim/beneficiary of non-USD cross
spreading which again saw demand for Yen at the highs. Exporters on the
offer will likely be seen tonight. About the only USD pair with any upside
follow-through from last week today was USD/CAD. Traders note that high
prints at 1.0247 included light stops and possible official buying
suggesting the rate will try for the 1.0250/80 area before reversing. In my
view, the Loonie is at the top of the range and a drop is coming so
aggressive traders can sell USD/CAD anytime over the 1.0250 area near-term.
I'll make it an official set-up in the next 24 hours but I like the sell
side over the 1.0250 area. In my view, the USD has had a dismal day of
non-event trading. Today's highs/lows cannot be relied on to offer
significant data for the coming few days as the volume were so low and the
interest non-existent. Traders appear to be waiting for more news later in
the week. Expect a quiet overnight session also.

EURO/USD Daily

Resistance 3: 1.5840/50

Resistance 2: 1.5800

Resistance 1: 1.5750/60

Latest New York: 1.5749

Support 1: 1.5670/80

Support 2: 1.5620/30

Support 3: 1.5580 (MAJOR SUPP)

Comments

Early break bought back but whipsaw is on no volume and rate is stuck. Some
semi-official selling possible. Stops and short-squeeze by Russian buying
this morning; resistance at 1.5750 area holding. SWF's were selling EURO on
the rally last week; need to see them back this week. Close back under the
1.5700 area needed to pressure buying signals or at least postpone them a
few days. Lots of two-way action under the 1.5700 handle. Rate continues to
track Cable and vice-versa. Stops above the 1.5820 area possibly in range
today; stops under the 1.5620/30 area likely in size and enough to test
1.5580 major support. Hold shorts and let it work. Large names on the offer
reported into the highs, look for a top to form. Major support at the 1.5580
area and slightly below. The 50 bar MA likely to offer support should the
rate fall back but still looking for a test under the 1.5600 area soon.

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

All Day EUR German Prelim CPI m/m

USD/JPY Daily

Resistance 3: 108.80

Resistance 2: 108.40/50

Resistance 1: 108.00/10

Latest New York: 107.48

Support 1: 107.20/30

Support 2: 106.80

Support 3: 106.50

Comments

Early dip bought back, rate holds ranges despite an early attempt through
the 108.00/10 resistance area. Volumes not that high suggesting more two-way
action and bids will support. Rate grinding into offers and a rally may come
overnight Monday. Equities continue to drag on the pair but support appears
sold on the dip to 106.50 area. Rate is ready to test the size of offers at
the 108.00 area and beyond in my view. More stops beyond above 108.50 in
large size traders say. Rate likely to attempt more gains if oil drops and
equities rally. Exponential reversal signal still valid, expect more two-way
action and a test of the highs. Look to cover longs on a rally over the
108.25 area.

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

7:50pm JPY Prelim Industrial Production m/m

Analysis by: http://www.forexpros.com – Written by Jason Alan Jankovsky

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